Key Points:

FDI decelerates but demand conditions remain favorable overall. The seasonally adjusted April FDI 58.7 moderated from last month’s robust 66.0 but indicates continued growth in fastener markets (well above neutral 50 reading). About half of respondents saw better than seasonally expected sales, which was significantly lower than the 91% in March and the ~70% December through February. We attribute this to continued shipping delays/container shortages and an inability to source products, which has resulted in many respondents being unable to fulfill all customer orders. These dynamics have also translated into continued price increases; 94% of respondents saw higher point-of-sale pricing y/y and 72% higher m/m.

FLI moderates. The seasonally adjusted FLI was 76.7, decreasing vs. March’s 78.5, although the FLI had set new record highs the previous two months hence some moderation was likely overdue. The main driver of the m/m contraction was the six-month outlook, which was slightly less optimistic than prior months. We believe sentiment is being more directly impacted by supply chain constraints than in prior months when respondents were still navigating these challenges reasonably well. That said, we see a positive outlook for the FDI ahead as customer inventories remain at very low levels, and note an FLI well into the 70’s is consistent with expectations for continued improvement in fastener markets ahead. Even if respondents are not able to meet all demand, distributors seem to be able to meet enough demand to generate good levels of sales growth.