The combined cost-variance index (CVI) dropped 0.5% during 1998's second quarter. In this typically quiet quarter of manufacturer pricing activity, a predictable slip in the "Wire, cord and cable" commodity category and signs of a cooling domestic economy were the primary factors contributing to the decline. Second-quarter activity reduced the year-to-date Cost-Variance Index variance to an overall gain of 0.36% from last quarter's modest 0.86% gain.

Overall price change activity was relatively light during the second quarter. Of the 18 commodity categories, six were unchanged and eight came in with little (0.02% to 0.18%) change in April, May and June. Two of the more heavily-weighted categories showed the most significant variance during the quarter and both were down. "Conduit fittings and boxes" (weighted at 14.41%) dropped 1.52% while "Wire, cord & cable" (weighted at 18.66%) dipped 2.01%. "Utility products" (weighted at 2.51%) increased 2.77% and "Industrial controls" (weighted at 9.08%) rose 0.40%.

At the close of the first quarter, COMEX officials reported that copper traders were concerned that the economic crisis in parts of Asia would soon offset robust U.S. and European demand, which resulted in a 3.7% decline in spot copper prices in the second quarter of 1998, dropping from $0.7615 to $0.7335 per pound. Changes in copper typically precede changes in "Wire, cord and cable" by two weeks. Factor out the 2.01% drop in the "Wire, cord and cable" category and the index would reflect a second quarter variance of -0.12 and a 1.25% gain in the first six months of 1998.

A May 1998 report from the U.S. Commerce Department's Bureau of the Census showed that housing-unit starts during the first five months of this year increased 6% (+/-3%) compared with the same period in 1997. Other residential-construction statistics from the Census Bureau show this activity to be relatively flat and report construction slumped 1.5% in May, the worst drop in more than four years. And according to a monthly report from the National Association of Purchasing Managers (NAPM), Tempe, Ariz., manufacturing activity fell in June for the first time in two years. These could be signs of a slowing economy. Another key indicator of a slowdown came from the Federal Reserve, which decided not to raise interest rates at the end of the second quarter.

Third-quarter price-change activity is traditionally the slowest of the year and this pattern is expected to continue. Price changes announced so far will affect the "Wiring devices" and "Distribution equipment" categories. Look for fluctuation within the "Wire, cord and cable" commodity area, too.

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