The May Fastener Distributor Index declined for the fourth straight month, dipping to 56.6, though the rate of decline diminished from April to May.

“In the May survey, 54% of respondents indicated sales were ‘better’ relative to seasonal expectations vs. 56% in April,” writes R.W. Baird analyst David Manthey.

This produced a sales index declined to 61.2 from 63 in April.

Pricing gains were reported by 75% of respondents, who saw higher prices y/y (and 50% m/m) vs. 81% in April.

“For perspective on the strength of pricing in May – only 20% of respondents reported higher pricing at the low point in March of 2016,” Manthey wrote.

The resulting FDI pricing index of 87.5 came down just slightly off of April’s record 89.1 reading.

“Several respondents again commented on inflationary pressures in the channel, with one comment indicating material distributors are seemingly using tariffs to justify price increases even on products not affected by tariffs.”

Nearly 70% of respondents continue to view inventory levels as in line with expectations (68% of responses), 29% believe customers’ inventories are too low, and 4% see inventory levels as too high.

The Forward Looking Index was essentially unchanged, registering 58.8 in May vs. 58.9 in April, as an improved employment index was offset by a lower six month outlook.

“Given solidly-expansionary FDI and FLI readings, we believe market conditions are likely to remain in growth mode (albeit potentially moderating growth) in the coming months.”

Hiring sentiment improved in May, with 32% of respondents seeing higher employment levels vs. 19% in April, while 57% saw employment as in line (April 81%). The resulting FDI Employment Index rose slightly to 60.7.

“According to several participants, demand remains strong, with one respondent indicating ‘open orders are up 39% compared to last year at this time.’”

Steel tariffs and global trade remain “heavy” topics of discussion in the industry.

“One respondent indicated that they ‘still [have] concerns over the Chinese tariffs if they go through!’

“Inflationary pressures from raw material increases and steel/aluminum tariffs are increasingly evident in the channel.”

One distributor commented on this by saying, “Material prices in general are up, and some material distributors may take advantage of the situation and raise other material prices not subject to tariffs [i.e.] brass.”

Quantitatively, survey data points to sustained momentum expected through 2018, with 50% of respondents expecting higher activity levels over the next six months and 43% expecting similar activity.

The FDI is a monthly survey of North American fastener distributors conducted with the FCH Sourcing Network and the National Fastener Distributors Association. Web: fdisurvey.com