The nonmetallic mineral products industry-leading index increased 0.1 percent to 253.3 in December from a revised 253.0 in November; however, its 6-month smoothed growth rate decreased to 7.5 percent from a revised 8.1 percent in November, according to the U.S. Geological Survey.
The 6-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.1
The high leading index growth rate indicates that activity is likely to increase in the nonmetallic mineral products industry. The latest data show that total construction spending is at its highest level since before the last recession.
Nonresidential construction spending, which accounts for two-thirds of all construction spending, is still more than 10 percent higher year-to-date than last year despite a sharp decrease in manufacturing plants construction.
Rising employment, higher wages, and historically low interest rates, are supporting residential construction activity. Nonmetallic mineral products demand from residential construction activity is likely to increase further, as new home sales increased nearly 15 percent during 2015 and new home inventories are still below a balanced housing market level.
The 6-month smoothed growth rate is a compound annual rate based on the ratio of the current month’s index to its average level during the preceding 12 months. Only one of the four leading index indicators, the average workweek in nonmetallic mineral products facilities, increased in December. It contributed 0.5 percentage point to the net gain in the leading index.
In contrast, the decrease in the index of new housing permits issued contributed -0.3 percentage point, owing to a decrease in permits in the volatile multi-unit apartment building segment of the total housing permits index.
However, building permits for single-family homes, which is the larger segment, increased 8.0 percent from November. Moreover, total housing permits for 2015 were 12.0 percent higher than in 2014.
A tighter yield spread between the U.S. 10-year Treasury Note and the Federal Reserve’s federal funds rate contributed -0.2 percentage point. The stock price index for building products companies was essentially the same as it was in November, thus its contribution was zero.
The coincident index, which measures current industry activity, increased 1.1 percent to 146.7 in December from 145.1 in November. Its 6-month smoothed growth rate increased to 8.6 percent in December from 7.3 percent in November.
Employment in the nonmetallic minerals products industry is the highest that it has been since May 2009. Production is back to the level before the 2008-2009 recession.