FCH Sourcing Network's Fastener Distributor Index (FDI) posted two of its best months ever in February and March, but April showed signs of market normalizing as the index posted a considerable overall decline despite an outlook that is still near a record-level.
The April FDI checked in at 58.7 — down 7.3 percentage points from March. While a notable one-month decline, it still indicates a healthy overall market for fastener distributors and is significantly better than the sub-50s seen during much of 2020 amid the COVID-19 pandemic.
Like the Institute for Supply Management's Purchasing Managers Index (PMI), any FDI reading above 50.0 indicates expansion, while anything below that indicates contraction. April's reading was the fifth-straight month with a reading of at least 57.7.
For context, the FDI bottomed out at 40.0 in April 2020 amid the worst of the pandemic's business impacts on fastener suppliers. It returned to expansion territory (anything above 50.0) in September and has been in solid expansion territory since the start of this past Winter.
The overall March to April FDI decline followed a four-point decline in the PMI, which fell from 64.7 in March to 60.7 in April.
While the FDI had a notable decline, its Forward-Looking-Indicator — an average of distributor respondents' expectations for future fastener market conditions — remained near a record-level at 76.7, down 1.8 points from March. It shows that FDI survey respondents — comprised of North American fastener distributors — expect business conditions to remain favorable for at least the next six months. This comes despite continued concern over supply chain and pricing issues. The FLI has been in the 60s each month beginning with September 2020.
"The April seasonally-adjusted Fastener Distributor Index (FDI) 58.7 showed market conditions cooled off from the frenetic pace seen in February and March as supply chain constraints inhibited growth," commented R.W. Baird analyst David J. Manthey, CFA, about the latest FDI. "Respondent commentary indicates underlying demand remains strong but servicing all demand is becoming increasingly challenging given intense supply chain/freight difficulties. Net, supply and freight remain bigger issues than demand in the fastener industry currently."
Of the FDI's factoring indices, sales was by far the biggest driver for the overall decline, falling from a breakneck mark of 90.6 in March down to a still-strong 65.2 in April. Other sizable movers included customer inventories falling from 11.8 to 11.1 and supplier deliveries increasing from 87.5 to 93.1.
See the full April FDI table below: