Exclusive feature: The T&D Market Index compiled by Denali Intelligence

The following is an exclusive look at an abbreviated version of the second quarter T&D Market Index researched and compiled by Denali Intelligence.

About the index

The T&D Market Index is based on detailed analysis of 11 critical spending categories that represent core purchases for most T&D organizations. They are:

* Line material
* Meters
* Steel structures
* Street lighting
* Switchgear
* Transformers
* Wire & cable
* Wood products
* Construction services (underground & overhead)
* Engineering services
* Vegetation management

Since most of these categories have seen significant volatility over the past two to three years, the index is based on a weighted composite developed from an analysis of more than 30 utility T&D spend profiles. Denali analyzes the key cost drivers (commodities such as steel and copper, labor, and other cost factors) to develop the historical and forecasted price trends associated with the index.

The index provides T&D organizations a snapshot of what has happened to their budget for purchased materials and services over the past 12 months (to explain budget variances) and gives projections for the coming year.

The 2nd quarter index: A snapshot

Led by soaring energy and steel prices, the index (see figure 1, above) once again showed strong movement, with a 5.1 percent (see figure 2, below) increase for the second quarter of 2008. Steel is up on all classes, ranging from 23 percent to 36 percent on varying grades. This spike in prices translated to a 12 percent increase in steel structures, with additional increases expected in near term months as base material costs impact the production line. This lag effect can be seen even more distinctly in the wire and cable segment, which posted a nominal change of 0.4 percent for the quarter but is expected to jump significantly in the near term of the third quarter.

The energy effect was also in play, with diesel fuel up an additional 20 percent in the second quarter, 40 percent on the year. Fuel was the primary mover on the services side of the index, as labor rates remained stable. The overall unemployment rate remained at 5.5 percent during the month of June, up from 4.6 percent a year ago, with an expectation of additional increases in the remainder of 2008.

Market forecast

* The U.S. domestic economy is caught in a crosswind: increasing recessionary pressures remain in place, but higher energy and raw material costs create an inflationary bias. These factors will act together to continue the slowing of the general economy.

* The Federal Reserve will hold interest rates steady, at least through the third quarter of 2008.

* Reflective of base energy cost increases, the index is forecasted to increase by 12 percent in 2008 versus 2007.

The abbreviated version of the T&D Market Index offers top-line insight regarding 12-month T&D price trends and forecasts; however, a full report can be obtained from Denali Intelligence.


Denali Intelligence (www.denaliintelligence.com/) offers subscription-based market intelligence designed specifically for sourcing professionals. Their category-specific market reports help clients develop high-impact sourcing strategies, prepare successful negotiations, and understand important market trends affecting their spend categories. Contact them for more information on the full version of Denali Intelligence’s T&D Market Index, or other reports at 888.824.8866 or info@denaliintelligence.com.

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