Nonmetallic Mineral Products Index Decreases

The nonmetallic mineral products industry leading index decreased 1.2 percent to 244.7 in February from a revised 247.7 in January, and its six-month smoothed growth rate declined to -0.6 percent from a revised 2.3 percent in January.

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 leading index growth rate fell into negative territory in February, but remained above the threshold that would suggest a decrease in activity in the nonmetallic mineral products industry.

Residential construction activity has been relatively flat year-to-date. However, low unemployment, higher wages, and historically low interest rates, along with home inventories below a balanced market level, should continue to support home construction in 2016.

Nonresidential construction spending could grow modestly in the near term with a few starts for power plants and highway construction projects planned for 2016. The nonmetallic mineral products demand from these construction activities will likely be modest, or could decrease slightly, in the near term.

Three of the four leading index indicators decreased in February, and one increased. A second consecutive one-half hour shorter average workweek in nonmetallic mineral products facilities contributed -0.9 percentage point to the net decrease in the leading index. A tighter yield spread between the U.S. 10-year Treasury Note and the Federal Reserve’s federal funds rate contributed -0.3 percentage point.

The index of new housing permits issued fell in February after being flat for two consecutive months. It contributed -0.2 percentage point to the leading index in February. In contrast, a rise in the S&P stock price index for building products companies in February contributed 0.1 percentage point.

The coincident index, which measures current industry activity, decreased 0.2 percent to 143.9 in February from a revised 144.2 in January. Its 6-month smoothed growth rate decreased to 4.6 percent in February from a revised 5.7 percent in January. Although the average workweek was shorter in nonmetallic minerals products manufacturing facilities, employment remained close to the 2009 high level.

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