- FDI dropped to lowest reading of year (46.4)
- Forward-Looking Indicator stable, indicating growth
The November seasonally adjusted Fastener Distributor Index (FDI) decreased sharply to just 46.4 from October’s 56.5, marking the lowest reading of 2024 to date.
“We caution against reading too much into one month’s result, especially in November given Thanksgiving / potential weather,” advised R.W. Baird analyst David Manthey (CFA) with Quinn Fredrickson (CFA).
Contraction drivers included sales (48.9 vs. 61.8 last month), supplier deliveries (46.7 vs. 61.7), and customer inventories (40.0 vs. 48.3). Employment remained stable, with 77% of responses saying employment levels were similar month to month.
One in three respondents (33%) indicated sales came in above seasonal expectations, which is below the 36% YTD average and 43% in October. Pricing remained stable (63%).
However, the Forward Looking Index “remains in a healthy spot,” Manthey noted. The FLI registered 52.3, which was essentially unchanged from October (52.6). Nearly 1 in 2 (43%) participants forecast better activity levels over the next six months, while 23% see lower and another 33% forecast stable trends.
“Although some caution persists due to ongoing macroeconomic/inflation uncertainties, overall sentiment among participants leans cautiously optimistic,” Manthey stated. This produced a six-month outlook index that remained healthy at 60 (October 66.7).
“Considering the current length of the ISM PMI downcycle/downbeat fastener market conditions, future Fed rate cuts, and potential post-election acceleration with emphasis on domestic manufacturing, we believe optimism regarding a turn in conditions ahead could be merited.”
Respondent commentary also leaned positive. With the election in the rear-view and potential for tariffs coming, some participants believe customers have resumed spending and/or stocking up.
“The election jitters are over and buying has resumed. Some people are stocking up in anticipation of tariffs, which is good short term and bad long term.”
Another respondent said: “Happy to have some resolve to the election season, with a better idea of what to expect politically for next year. Domestic manufacturing has been strong most of the year and we expect steady growth in the upcoming year. ”
Order feedback on November was mixed.
“Even though sales were down a bit in Nov, the two months of both Oct and Nov were much better than the two months previously of Aug and Sept.”
Others indicated weakening was simply a reflection of normal seasonal slowing.
“November sales were 12% lower than October, but this drop was forecast as it is a seasonal decline that our business experiences every Nov/Dec.”
Looking forward, the outlook continues to be difficult to predict, “with macro uncertainty, inflation, and potential tariff headwinds.”
“Our core industrial OEM business continues to be suppressed,” a respondent noted. “While there are many examples of specific OEM customers with strong backlogs and bright outlooks, there are more examples of the opposite that are making for difficult y/y comparables.”
Fastenal reported fastener sales were better than expected at +0.1% - the first since September 2023. Safety sales grew 5.5% and other non-fasteners increased 5.2%.
Special Question on Tariffs
In November, the FDI survey asked respondents about the impacts of potential tariffs on U.S. fastener markets.
A majority of distributors (56%) signaled support for U.S. President-elect Donald Trump’s pledge to impose broad tariffs soon after taking office on January 20.
A plurality of respondents (43%) leaned towards “there will be mixed results, but I support,” with an additional 13% deciding tariffs “will help, I support.”
Resistance to widespread duties was also strong, with 40% of respondents opposing the proposed trade remedy.
Comments varied.
“China has been dumping into the global markets for decades now. Happy to have leadership willing to do something about it, even though the U.S. market will struggle to wean itself off of cheap goods.”
“Needs to be strategic like in 2018 but across the board is not a good plan.”
“Historically, no BLANKET tariff imposed has EVER worked since the 1800s. In fact, the Smoot– Hawley Tariff Act signed by Hoover is famous for making the existing 1929 depression into the Great Depression. Those who do not learn from history are doomed to repeat it. Only people who don’t understand basic economics would think blanket tariffs are a good decision. (Note that certain countervailing duties are proven effective but those are not tariffs per se.)”
“We will have to see what effect President Trump will have on Asia, specifically China and Taiwan situations.”
“Canada and the USA need to band together and sign a bilateral agreement to exert pressure 1) On China and 2) Mexico as a conduit to cheap Chinese EVs and products in Canada/USA. The U.S. needs energy and Canada has it — those Northern States don't need a 25% tariff on Canadian oil. Let’s make a deal… and I’m quite sure we will by summer 2025.”
“Worried about trade tariffs. Could cause margin and supply issues. Nobody wins trade wars.”
“It’s a level playing field, we will all have to deal with them.”
“Tariffs in general are a bad idea. Just dumb. I support a free market.”
“People don’t understand who actually pays those tariffs. People think we are punishing other countries, but that money goes to the U.S. government.”
“Of course it will hurt temporarily, until it all balances out, then business as usual but with a bump in USA manufacturing. A long time coming!”
The FDI is a monthly survey of North American fastener distributors conducted by the FCH Sourcing Network, the National Fastener Distributors Association and Baird. Web: fdi.com
