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Nonmetallic Mineral Products Index Increases

The nonmetallic mineral products industry leading index increased 1.6 percent to 249.7 in April from a revised 245.7 in March, and its six -month smoothed growth rate increased to 2.4 percent from a revised -0.2 percent in March, 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.

After declining since November, the leading index growth rate has risen above the threshold that normally suggests an increase in activity in the nonmetallic mineral products industry. Construction activity indicators, such as higher home prices and low home inventory levels, are likely to support the residential construction sector’s demand for nonmetallic mineral products.

Residential construction activity was slow at the start of 2016; however, low unemployment and higher wages subsequently lifted new home sales 16.6 percent in April. This trend is likely to continue if interest rates remain low. In contrast, nonresidential construction activity, which accounts for two-thirds of construction spending, grew much slower year-to-date.

The reduced industrial mineral products demand from nonresidential construction activities will likely slow growth in the nonmetallic mineral products industry in the near term. The six -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.

Three of the four leading index indicators increased in April and one decreased. A one-half hour longer average workweek in nonmetallic mineral products facilities made the largest positive contribution, 0.9 percentage point, to the net increase in the leading index.

The rising S&P stock price index for building products companies contributed 0.4 percentage point.

The index of new housing permits issued, which had declined since November, increased in April. It contributed 0.3 percentage point to the leading index. Most of that increase came from a nearly 10 percent surge in building applications for large multi-unit apartment buildings.

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 1.0 percent to 145.2 in April from a revised 143.8 in March.

Its six-month smoothed growth rate increased to 5.2 percent in April from a revised 4.2 percent in March. The construction sector slowed its rate of new hires in April, but offered longer hours to its existing employees.