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USGS Index Supports Industry Growth

The nonmetallic mineral products industry leading index increased 0.3 percent to 240 in December from 239.5 in November, according to the latest report from the U.S. Geological Survey (USGS). However, its 6-month smoothed growth rate remained at the 2.2 percent growth rate of November.

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.

Although the nonmetallic mineral products industry leading index growth rate ended the year flat, it still suggests that the recovery in the nonmetallic mineral products industry is likely to continue in the near term. Nonresidential construction spending is accelerating and underpinning nonmetallic mineral product demand.

Meanwhile, the supply of available homes on the market has fallen to a 4.4 month supply, well below the 6.0 month supply which is considered to be a balanced market. This could stimulate residential construction activity.

Only one of the four leading index indicators increased in December. The S&P stock price index for building products companies increased sharply for a second consecutive month and outweighed declines in the other indicators. It contributed 0.4 percentage point to the net increase in the leading index. In contrast, the index of new housing permits decreased and contributed -0.1 percentage point.

Permits for multi-family apartment buildings dropped and now stand at 10 percent lower than December of 2013. However, permits for single-family home building, the largest portion of residential construction spending, increased to a seven-year high level. The closer yield spread between the U.S. 10-year Treasury Note and the Federal Reserve’s federal funds rate also contributed -0.1 percentage point.

The average workweek in nonmetallic mineral products establishments was unchanged from November. Nevertheless, these establishments have been steadily adding employees since the start of the year.

The coincident index, which measures current industry activity, increased 1.8 percent to 139.2 in December from a downwardly revised 136.8 in November. Its 6-month smoothed growth rate rebounded to 8.7 percent in December from a revised 6.3 percent in November.

The USGS uses the same methodology for the nonmetallic mineral products indexes that it uses for the metal manufacturing indexes in the Metal Industry Indicators. This methodology consists of constructing and tracking, each month, two composite indexes of diverse economic indicators. The composite leading index for nonmetallic mineral products signals, several months in advance, major changes in current economic activity as measured by a composite coincident index.