U.S. Fastener Distributor Index Hits New Record-Low in April

On the bright side, respondents’ six-month outlook improved slightly.

FCH Sourcing Network’s monthly Fastener Distributor Index (FDI) set a new record-low during April amid worsening impacts from the COVID-19 pandemic, hitting the lowest mark in the index’s nine-year history.

The FDI — operated by FCH in partnership with R.W. Baird — showed that April registered a seasonally-adjusted reading of 40.0, declining 4.4 points from March, which was already tied for the previous record-low.

For the index, any reading above 50.0 indicates expansion, whereas anything below 50.0 indicates contraction.

On the positive side, the FDI’s forward-looking-indicator (FLI) — which measures distributor respondents’ expectations for future fastener market conditions — showed some signs of stabilization by improving 2.9 points to 36.2

“Net, conditions remain very weak, but expectations for a gradual reopening of the economy have some participants leaning slightly more optimistic than previously,” noted R.W. Baird analyst David Manthey, CFA, about the April FDI.

April’s index included a seasonally-adjusted sales index that took another 20.6 point nosedive from March to a paltry mark of 14.0, compared to 54.9 just two months earlier. The sales index indicates that April selling conditions were at an all-time worst in the index’s nine-year history.

The index indicated that April hiring stabilized, albeit at a low level. April’s employment reading of 26.8 was near March’s 27.0. Manthey said no FDI survey respondent noted higher employment levels compared to seasonal expectations for a second-straight month and that 46 percent characterized employment as below expectations — the highest such percentage in survey history.

In other April FDI metrics:

–Supplier deliveries increased 8.1 points from March to 76.8
–Respondent inventories increased 3.4 points from March to 68.3
–Customer inventories dipped 1 point to 47.6
–Month-to-month pricing jumped 9.8 points from March to 59.8
–Year-to-year pricing improved 6.3 points from March to 67.1

Looking at expected activity levels over the next six months, sentiment shows a pessimistic outlook, though better than in March:

–54 percent of respondents expect lower activity over the next six months (73 percent in March)
–34 percent expect higher activity (16 percent in March)
–12 percent expect similar activity (March 11 percent)

Baird shared that FDI respondent commentary was downbeat, but that some are optimistic about future conditions. Respondent quotes included the following:

–”We lost 80 percent of our sales. It will not get better if we continue the [shelter in place] since most of our customers are closed. Those that are open have limited work they are allowed to do at this time.”

–“We are hoping for higher activity once the stay at home orders are lifted.”

–“April sales were down 14 percent. I expect May might be up slightly up because businesses seem to be opening up slowly.”

–“Even with some states opening up, the climb back to normal levels I expect to be slow.
Some manufacturing was already trying to recover from 2 slow quarters prior to the pandemic.”

See the full FDI April chart below: