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AUG 2017

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www.rockproducts.com ROCK products • August 2017 • 55 Aggregates Industry Almanac Economic Impact of the Industry is reasonable to presume that no small part of the infrastruc- ture investment dollars will go to update the nation's roads and bridges. In the American Recovery and Reinvestment Act (ARRA), for instance, $27.5 billion of the $105.3 billion infra- structure budget (one-quarter of the total) targeted roads and bridges. 7 While the total spent of the ARRA was about $800 billion, presumably an infrastructure bill will more tightly focus on infrastructure projects. If the final legislation were to approach the $1 trillion mark, then funding for roads and bridges might rise by hundreds of millions of dollars. According to the U.S. Geological Survey (USGS), in the con- struction of interstate highway, natural aggregates – crushed stone, sand and gravel – accounts for 94 percent of the mate- rials used, with cement (3 percent), asphalt (2.2 percent) and steel (0.4 percent) making up the rest. 8 A heavy use of aggregates is not limited to road construction. By volume, concrete is 60 percent to 75 percent natural aggregates. According to the USGS: Natural aggregates, which consist of crushed stone and sand and gravel, are among the most abundant natural resources and a major basic raw material used by construction, agri- culture, and industries employing complex chemical and metallurgical processes. Despite the low value of the basic products, natural aggregates are a major contributor to and an indicator of the economic wellbeing of the nation. 9 Clearly, an increase in infrastructure spending of nearly any sort, and especially spending targeting the nation's trans- portation infrastructure, will affect operators in the natural aggregates In this SCORECARD, we quantify the economic impacts on jobs and broader economic effects of the aggregates industry. Our analysis is intended to both be descriptive and predictive, quantifying the current impact of the aggregates industry on the broader economy and shedding light on how an expan- sion of the industry, perhaps through new infrastructure spending, might ripple through the economy more broadly. To do so, we employ a sophisticated and proprietary multi- regional social accounting matrix developed by Economic Modeling Specialists International (Emsi). 10 This modeling system estimates the direct effects and indi- rect effects of one type of economic activity on the sales, jobs, earnings, value-added (or gross regional product – GRP), and taxes at the county, state or national level. In computing these "ripple effects," the model accounts for both supply-chain impacts (direct and indirect effects) and increases in house- hold income (induced or spin-off effects). 11 We also chose Emsi's modeling approach because it tends to be conserva- tive, thereby avoiding the exaggeration of economic impacts and providing policymakers a reasonable assessment of eco- nomic impacts. 12 •  Our analysis begins with an overview of the aggregates industry, including recent and time series data on the size of the industry. •  Second, we turn to the quantification of the broad economic impacts of the aggregates industry. We present evidence on economic impacts at the national level, the state level (for all states), and at the county level for three select counties. •  Third, we discuss how the aggregates industry impacts the economy in other ways, including the repurposing of quar- ries to provide both commercial and recreational benefits to the public, creating sustained economic benefits long after its quarry operations have ceased. Overview of the Aggregates Industry For our study, the aggregates industry is defined to include the economic sectors "Construction Sand and Gravel" and "Crushed Stone," and the impact analysis focuses more narrowly on crushed stone quarrying and sand and gravel mining. 13 The aggregates industry, as shown in Table 1, produced output valued at about $25 billion in 2016. 14 Data for 2016, which was just released by the USGS (and is subject to revision), suggests a significant increase in demand for aggregates (a 10 percent increase from 2015) in the last year. The USGS attributes the gain to "significantly stronger con- struction activity across the country in 2016, and recovery in the private sector and residential construction experiencing a level of growth not seen since late 2005, consumption of construction aggregates is likely to continue to increase." 15 Since 2011, the value of the industry's output has grown by 7.1 percent annually. The increase in value is attributable mostly to production increases (nearly 5.3 percent annually). The average price (in nominal dollars) has risen at a rate of 3.1 percent annually since 2011, but much of that increase has occurred in the last few years in response to rapidly increasing demand and production.

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