April FDI Still Solid at 53.8, But Slower Than March
05/02/2012 02:40 PM CDT

The Fastener Distributor Index (FDI)is a monthly survey of North American
fastener distributors conducted in partnership with the FCH Sourcing Network,
www.fastenersclearinghouse.com, and BB&T Capital Markets, which aims to provide
insight into current trends and outlooks. As a diffusion index, readings above
50 signal strength and below 50 signal weakness.

April's FDI is 53.8, versus 55.9 in March. This is a good start to Q2'12, just
not as good as Q1'12. In Q1'12 the index averaged 56.4, so April's reading
suggests more tepid growth to begin Q2'12. It is also notable that the FDI
underperformed versus the national manufacturing index (PMI). Sales hurt,
slipping from the mid- to high-60s in Feb./Mar. to 55.1. Other elements,
though, supported a still healthy view, specifically slower Supplier Deliveries
(59.0 in April, vs. 51.2 average in Q1'12) and Customer Inventories (42.3 in
April) that are still viewed by distributors as too low. Most end markets and
geographies did not diverge much from the broad trend, though construction,
electronics and the Northeast looked a little softer. Why April was not so
robust is hard to say. Maybe direct shipping is accelerating as project/capital
spending ramps (thus, a divergence between FDI and PMI). Perhaps Q1'12 had some
demand pull forward. But we can say this: a reading of 53 – 54 still
constitutes sequential growth in April over March.

The outlook is still the strongest component, but a poor trend has to be
acknowledged . 61.5% of respondents expect activity to be higher in six months;
just 10.3% said lower. This is a good reading, but one cannot ignore that the
spread has narrowed over the last four months. Respondents feel good about
things, but not as good as they did to start the year.

Price is still mildly favorable, not obviously trending. Year-to-year,
point-of-sale pricing is up (48.7% of respondents) or flattish (43.6%); rate of
change backed up a bit to 2.5% – 3.0%. We may be seeing past increases
anniversarying at a faster rate than new hikes impact. Sequential pricing is
still mildly favorable, but did not pick up versus March's glimmer of optimism.

The supplemental question for April asked what markets companies see suited to
invest in. Respondents seem attracted to the flame. We asked distributors
inclined to invest in new markets what ones they thought merited investment.
Most mentioned: General Industrial/Job Shops (20.3% of responses). This is not
aggressive, as Industrial is where most firms already play suggesting a
low-risk effort to target tangential spots within already known areas. The next
three industrial markets most often mentioned were Automotive (15.6%), Oil/Gas
(9.4%) and Metal/Mining (7.8%), all clearly exciting markets, in our view. High
margin electronics also were targeted (10.9%). It would seem these are the
markets where competition could escalate.

All SEFA members who are fastener distributors are welcome to participate in the
monthly FDI survey, which asks just a few multiple choice questions in an online
survey that can be completed in moments.  Go to www.fdisurvey.com to request a
user ID, or contact Eric Dudas of FCH at 877-332-7836.