The August Fastener Distributor Index Signaled Stabilization

After a rough couple of months, the August Fastener Distributor Index signaled stabilization (51 vs. 45.1 in July). "The souring conditions of June and July seem to have been arrested in August, when conditions seem to have been in line with expectations. " Over the last three months the FDI has averaged 49.2 while the national PMI has averaged 49.7. "Both measures seem to be signaling stable demand. " Sales (51.4 vs. 38.2 in July) "brought the greatest relief, with August being largely as respondents would have expected, after July performed far worse. " Other index components – Employment, Supplier Deliveries, Customer Inventories –were "generally better but really did not change in substance from the past couple months. " Construction was the lone end market that stood out, resuming the strength that has been evident through much of the year. "The FDI seems to be echoing what we think is becoming the dominant sentiment within manufacturing: Fear of cascading weakness is being supplanted but a sense of stable, slower conditions and a likelihood of 'muddling through'. " Optimism rose, with 31% of respondents expecting activity to be higher six months from now — slightly higher than the 28% of respondents that predict lower activity six months out. Optimism was improved from July, when only 18% forecasted higher activity. August was the first month this year where sentiment did not erode, according to the FDI. "That sentiment improved in August, but the balanced reading still points to uncertainty, in our view. " Pricing data was mixed as well — marginally worse but substantially unchanged from July. "There remains no impetus for fresh price hikes, and given a string where that has been true the annual price increases remain very modest at 1%–2% in August (same as June/July). In fasteners, revenues look unlikely to get any boost from price. " The August index revealed that pricing appears to be keeping pace costs, with 36% of respondents indicating that "price and cost are in synch. " However, the second largest group (25%) indicated that costs were rising faster than price. And 14% indicated that costs were rising, but this was being more than offset with price. "Margin positive responses were 28%, margin neutral responses were 36%, and margin negative responses were 36%. " The FDI is a monthly survey of North American fastener distributors. As a diffusion index, readings above 50 signal strength and below 50 signal weakness. The FDI is a joint production of BB&T Capital Markets and the FCH Sourcing Network, the online network for industrial fasteners. Source: GlobalFastenerNews