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Mixed Signals from Nonmetallic Minerals Index

The nonmetallic mineral products industry-leading index decreased 0.3 percent to 239.6 in January from a revised 240.3 in December and its six-month smoothed growth rate declined to 0.9 percent from a revised 2.1 percent in December.

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 decrease in the nonmetallic mineral products industry leading index growth suggests that the recovery in the nonmetallic mineral products industry is likely to slow in the near term.

Nonresidential construction spending underpinned the nonmetallic mineral product industry during 2014, particularly spending on manufacturing plants, which increased over 18 percent from 2013. However, declining new orders for durable goods and lower oil prices are likely to have a negative effect on manufacturing and energy plant construction in the near term.

Meanwhile, sales of new homes increased in 2014 and the supply of available homes on the market is down to a 4.4-month supply, well below the 6.0-month supply which is considered to be a balanced market. This low housing inventory, along with rising employment and low interest rates could promote residential construction activity in

Three of the four leading index indicators decreased in January and one was unchanged from December. 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 to the overall decrease in the leading index.

A lower index of new housing permits contributed -0.1 percentage point. Permits for single-family home building, the largest portion of residential construction spending, decreased from the seven-year high level of December. The change in the S&P stock price index for building products companies was so small that its contribution rounded to zero. The average workweek in nonmetallic mineral products establishments was unchanged from December.