Analysis | What Slowdown? Delta Air Lines and Fastenal Forge Ahead

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Prices are surging for flights and industrial fasteners, but customers just keep on buying. 

Fastenal Co., a distributor of manufacturing odds and ends, and Delta Air Lines Inc. unofficially kicked off the industrial earnings season on Wednesday. After weeks of hand-wringing by investors over concerns that rising inflation would kneecap the economic recovery, both companies’ updates were a pleasant surprise. Fastenal said net sales increased 20.3% in the first quarter, its strongest growth in at least a decade. Price increases explain part of the rise — about 580 to 610 basis points. But that still means the vast majority of the growth came from manufacturing and construction customers buying more items, a sign that underlying demand remains robust. Delta, meanwhile, said it returned to profitability in March and would make money in the June quarter. That comes despite expectations for fuel prices to jump to as much as $3.35 a gallon in the second quarter (including a 20-cent contribution from its refinery operations). Adjusted jet fuel costs for the company averaged $2.79 in the recently ended period and $2.10 for the final three months of 2021.

This can’t go on forever. Fastenal noted that inflation in fuel prices, shipping services and stainless steel continued in the first quarter and said that the company would increase its prices as needed to offset that impact. Prices paid to U.S. producers jumped 11.2% in March from a year earlier and 1.4% from February, both records, the Labor Department said separately on Wednesday. Eventually, there is some breaking point at which price increases start to deter purchases. But at least as far as these two corners of the industrial world are concerned, that point hasn’t been reached yet.

Read more:  Industrial Worry Shifts From Supply to Demand

There are idiosyncratic reasons industrial distributors and airlines might be more isolated from inflationary pressures….

Read further.

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