Global Fastener News

FEATURE

The Fastener Distributor Index dropped for a second consecutive month, but a variety of economic measures showed the current strong sector is construction.  Fastener sales were weaker and pricing stagnant.

The seasonally adjusted August FDI fell to 46.7, “consistent with the tough current environment for many distributors.”  

“Added contraction was driven by weaker sales sentiment and a material decline in perceived customer inventories.” 

Pricing, employment, and supplier deliveries were largely unchanged, while the long-term outlook for industry sentiment ticked modestly lower. 

“Overall, we believe that fastener distributors continue to face material demand pressure from lower commodity prices, forex, and weaker industrial production.”

Weaker sales trends continue. Nearly 68% of respondents reported sequentially flat or lower sales for August. 

“In our view, the results are consistent with sluggish recent growth from Fastenal (+1.6% yr/yr in August versus a five year average of +13.2%), Grainger (-1% in July versus FY’15 guide of 0%-2%), and MSC (company estimated +2.2% in June versus +7.6% last year).”

Reduced customer inventories also impacted results, reflecting “tightening inventories among manufacturers and reduced overall end market demand.”

The FDI found the pricing environment largely stagnant. Point-of-sale pricing for August was unchanged versus July for 73% of survey participants. 

“We believe the overall environment for price increases remains notably soft given material demand pressure (declining commodity prices, forex, weaker industrial production) and minimal inflation.”

“In our view, the data reflects overall weakness within the domestic economy, and 2015 has proven difficult thus far for many industrial distributors. We believe lower energy spending is at the root of weaker sales, with currency woes further compounding the slowdown.” 

The FDI and Pricing are diffusion indexes based on data supplied by FCH Sourcing Network.

The FDI is a monthly survey of North American fastener distributors, conducted with the FCH Sourcing Network, the National Fastener Distributors Association and BB&T Capital Markets.

• The National Association of Manufacturers’ third quarter installment of its 2015 Manufacturers’ Outlook Survey found “that although two-thirds of manufacturers polled remain positive, economic and policy challenges continue to curb their optimism.  Close to 80% of manufacturers continue to cite an unfavorable business climate as the top business challenge, and roughly 64% believe there are still sufficient weaknesses in the U.S. economy, and, as such, the Federal Reserve should wait until the beginning of the year to raise interest rates.” 

“The global economic climate continues to pose challenges to manufacturers,” said NAM Chief Economist Chad Moutray. “This latest survey highlights the anxiety manufacturers continue to feel in the face of headwinds like the strong dollar and weaker growth in key international markets.”

The NAM Manufacturing Outlook Index is 45.6, down from 51.8 in June. In addition, 67.3% of respondents are positive in their own company’s outlook – down from 76.3% in June.  

Manufacturers expect sales to grow by 2% over the next 12 months, down from 4.5% in December and 2.7% in June. Web: nam.org

• BB&T Capital Markets reported only one of its publicly-traded indices showed gains in August, with Cement, Aggregates & Concrete up 1.7% in August. 

Four indices have been strong thus far in 2015: Cement, Aggregates & Concrete are up 18.7%; Building Materials are up 16.6%; Consumer Durables up 13.4%;  and Commercial Durables up 12.8%. 

BB&T found indexes measuring industrial manufacturing and non-construction distribution exposure – Flow Control, Industrial Distribution, Industrial Manufacturing – “continue to lag the broader market and enterprise value/EBITDA multiples have contracted since last year. While the ISM – Purchasing Managers’ Index and ISM – New Orders fell to their lowest levels in the past year, both again indicated expansion with readings above 50.” Web: bbtcapitalmarkets.com

•  The Association General Contractors reported that construction firms added jobs in 40 states and the District of Columbia during 2014 while construction employment increased in 38 states and DC. 

AGC noted that construction employment gains are consistent with the general optimism most contractors expressed in the association’s recently released Construction Hiring & Business Outlook. AGC chief economist Ken Simonson observed that “the underlying trend is very positive, with construction employment expanding at more than double the rate for total nonfarm payroll jobs.” Web: agc.org

• The Equipment Leasing & Finance Association’s monthly leasing and finance index showed July 2015 new business was up 4% from 2014.  July volume was down 14% from June 2015.

The August ELFA confidence index was up to 67.4% from 62.6% for July.

“The consensus forecast for the second half of 2015 is for the U.S. to show modest, if not robust, economic growth,” ELFA president William Sutton said.  “Despite economic headwinds in parts of Europe and China, as well as constant chatter about a looming interest rate hike by the Fed, U.S. businesses in many sectors are investing steadily in productive assets, in the process relying on financing solutions for these equipment acquisitions.”  

The index measures 25 companies in the $903 billion equipment finance sector. Web: elfaonline.org

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