The Nonmetallic Mineral Products Industry Indexes increased 2.2 percent to 246.0 in August from a revised 240.7 in July, and its six-month smoothed growth rate increased to 3.6 percent from a revised -0.6 percent in July, according to the U.S. Geological Survey’s (USGS) National Minerals Information Center.
The six-month smoothed growth rate is a compound annual rate that measures the near-term trend. A growth rate above +1.0 percent is usually a signal of future growth in industry activity, while a growth rate below -1.0% points to a decrease in activity.
“The leading index growth rate generally declined in 2014 and has been more volatile in 2015. The sharp increase in August would normally suggest that industry activity growth should accelerate in the near term however, the latest data show that total construction spending edged up only slightly,” said the USGS’s Gail James.
Nonresidential construction, which accounts for two-thirds of all construction spending, has slowed. One of the fastest growing construction activities, manufacturing facilities construction, has begun to recede as a result of decreased manufacturing activity. Also, falling oil prices have reduced energy plant building and industrial minerals consumption from unconventional oil and gas drilling and servicing companies.
The declines in these activities will likely have a strong negative pull on nonmetallic metal consumption in the near future. In contrast, new home sales rose to a seven-year high in August and housing inventories are below a balanced housing market level; this bodes well for nonmetallic minerals consumption from future residential construction activity.
Three of the four leading index indicators increased in August. A longer average workweek in nonmetallic mineral product facilities made the largest positive contribution, 1.2 percentage points, to the net increase in the leading index. The S&P stock price index for building products companies reached a record high in August and contributed 0.7 percentage point to the leading index.
A rise in the index of new housing permits issued contributed 0.3 percentage point. Housing permits remain close to the eight-year high achieved in June. In contrast, the contribution from a narrower yield spread between the U.S. 10-year Treasury Note and the Federal Reserve’s federal funds rate contributed -0.1 percentage point.
The coincident index, which measures current industry activity, increased 2.6 percent to 143.3 in August from a revised 139.6 in July. Its six-month smoothed growth rate increased to 6.2 percent in August from a revised 1.4 percent in July.