Key Takeaway:

The seasonally adjusted Fastener Distributor Index (FDI) expanded further in March, increasing to 53.0, up from 50.5 in February. Demand commentary leaned overall fairly positive but balanced out by a noticeable uptick in comments regarding continued rises in freight/container costs and labor strikes/delivery issues. This month’s Forward-Looking Indicator (FLI), meanwhile, was stable, albeit below 50, which implies deceleration could be ahead. Net, we believe the FDI suggests a modestly improving/growing fastener market in March. Bigger picture, the index and market conditions continue to climb out of the malaise seen throughout most of 2023, with some lingering sources of uncertainty as participants look to the remainder of 2024, election, labor strikes, port/ocean container issues, etc.

Key Points:

FDI sees further m/m improvement. The seasonally adjusted FDI saw improvement for the third consecutive month, coming in at 53.0 (February 50.5). Improvement in the index was more broad based than in recent months as two of the four underlying indices expanded m/m (sales and employment) vs. just one last month (supplier deliveries). Looking at the sales index specifically, 40% of respondents indicated sales came in above seasonal expectations – improving vs. 31% last month and exceeding the 31% average over the past year. Another 47% said sales were in line (31% in February), while just 13% saw weaker sales than expected compared to 38% last month. The 13% below expectations marked the lowest percentage seen since March 2022 (6%).

FLI steady at below 50. The FLI continues to somewhat balance out the positivity registered in the overall FDI as the FLI remains sub 50 (47.3) – indicating contraction. However, the FLI was relatively unchanged m/m with February’s 47.9. Looking at it vs. February, a more bullish employment picture was entirely offset by a less rosy six-month outlook. On the outlook specifically, respondents were exactly split between those expecting higher activity levels six months from now vs. today (33%), similar (33%), and lower (33%). This compares to 47% of respondents predicting higher in February, 34% similar, and 19% lower. This drove the six-month outlook index to decline to a reading of 50.0 vs. 64.1 last month.