The nonmetallic mineral products industry leading index increased 1.3 percent to 247.5 in October from a revised 244.3 in September, and its six-month smoothed growth rate increased to 4.3 percent from a upwardly revised 2.0 percent in September, according to the U.S. Geological Survey.
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 percent points to a decrease in activity.
The rise in the leading index growth rate suggests that activity could increase in the nonmetallic mineral products industry. The latest data show that nonresidential construction spending, which accounts for two-thirds of all construction spending, rose 10 percent year-to-date.
Highway maintenance, a major consumer of nonmetallic mineral products, is rising and is likely to lift nonmetallic mineral products demand in the months ahead. Furthermore, nonmetallic mineral products demand from residential construction activity is also likely to increase, as home inventories are well below a balanced housing market level.
Rising employment, higher wages, and low interest rates could elevate residential construction activity. Meanwhile, another consumer of nonmetallic mineral products, oil and gas well services, is not likely to generate additional demand unless a disruption in oil supplies occurs.
Three of the four leading index indicators increased in October. A longer average workweek in nonmetallic mineral products facilities made the largest positive contribution, 0.7 percentage point, to the net increase in the leading index. Moreover, employment in the nonmetallic minerals products industry is the highest that it has been since May 2009.
A rebound in the index of new housing permits issued contributed 0.4 percentage point. The total housing permits index was pushed up mostly by an increase in the volatile multi-unit apartment building permits segment. However, permits for multi-unit apartment buildings are 33 percent less than they were at their recent peak reached in June.
The S&P stock price index for building products companies resumed its upward climb in October, after a slight dip in September and contributed 0.2 percentage point to the leading. In contrast, a tighter 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 2.7 percent to 144.5 in October from a revised 140.7 in September. Its six-month smoothed growth rate increased to 7.1 percent in October from an upwardly revised 2.1 percent in September.