NodeJS (Express) application won't run if node_modules does not exist on host

Hello fellow forum members,

I am having trouble running an Express application using Docker compose. I am using the following Dockerfile:

FROM node:6
# Install app dependencies
RUN mkdir -p /usr/src/app
WORKDIR /usr/src/app
COPY package.json /usr/src/app/
RUN npm install
# Bundle app source
COPY . /usr/src/app
EXPOSE  3000

Here is my docker-compose.yml file:

version: '2'
    image: mongo
      - "27017:27017"
    command: "--smallfiles --logpath=/dev/null"
    build: .
    command: npm start
      - .:/usr/src/app/
      - "49160:3000"
      - db

I am trying to run the application by docker-compose build then docker-compose up
However, I am finding out that if I do not have the node_modules folder on the host, the app does not run at all.
I am assuming that running npm install in the Dockerfile should install the dependencies in the container, but apparently that is not happening. Is there something I am missing?
I would really appreciate anything that would help point me in the right direction.

Docker version 1.11.1, build 5604cbe
docker-compose version 1.7.1, build 0a9ab35
Ubuntu 14.04 x64 3.13.0-85-generic

Specify node_modules as follows.
- .:/usr/src/app/
- /usr/src/app/node_modules