Pit & Quarry, February 2017

QUARTERLY AGGREGATE PRODUCTION DOWN A n estimated 687 million metric tons Mt of total construction aggregate were produced and shipped for consumption in the United States in the third quarter of 2016 according to the U S Geological Survey USGS This figure is a slight decrease compared with what USGS reported in the third quarter of 2015 Still the estimated production for consumption in the first nine months of 2016 was 178 billion metric tons Gt an increase of 5 percent compared with the first three quarters of 2015 AGGREGATE FORECAST By David Chereb Factors to consider when forecasting T he economy is doing better and confidence is growing This will translate into somewhat faster gross domestic product growth for 2017 as well as slightly higher aggregate demand compared to our outlook in the summer Business investments will likely grow in 2017 and by quite a bit if the corporate tax rate is dropped substantially below the current 35 percent Beyond 2017 capacity constraints higher import prices and labor shortages will begin a multi year upward path for inflation This also means higher interest and mortgage rate As usual this will impact construction activity in a negative way Hence you should expect a drop in Third quarter figures decreased in six of the nine geographic divisions USGS measures compared with that sold or used in the third quarter of 2015 Production for consumption decreased in 22 of the 43 states that were estimated with the five leading states being Texas California Michigan Pennsylvania and Ohio The combined production for consumption of these five was 197 Mt a 5 percent decrease Also an estimated 397 Mt of crushed stone were produced and shipped for consumption in the U S in the third quarter of 2016 a decrease of 3 percent compared with that of the third quarter in 2015 The aggregate consumption in 2018 with a slow recovery estimated production for consumption in the first nine months of 2016 was 105 Gt an increase of 6 percent compared with that of the same period in 2015 For the quarter the estimated production for consumption of crushed stone decreased in six of the nine divisions USGS measures compared with that sold or used in the third quarter of 2015 Production for consumption decreased in 24 of the 46 states estimated and the five leading states were Texas Pennsylvania Ohio Florida and Illinois Their combined production for consumption was 123 Mt in 2019 The timing of any infrastructure stimulus will have a big impact on our near term outlook Our assumption is that something will pass Congress in 2017 with most of the changes impacting construction contracts between late 2018 and 2023 We have added continued on page 92 Dr David Chereb has many years of experience forecasting construction materials and his webbased forecasting models have captured every major turning point in materials demand for more than 15 years Chereb received his Ph D in economics from the University of Southern California He can be reached at david chereb@ sc marketanalytics com our estimates for 2019 in the table If our consumption path is correct 2017 will be the seventh year of aggregate demand gains We expect changes will be sharper and more volatile during the next seven years With entitlements growing the labor force slowing and U S debt at more than 20 trillion it will be a huge challenge to maintain prosperity The most important economic factor will be the rate of productivity growth The slowdown in productivity growth this decade must be reversed if we are to successfully navigate through the headwinds of the next 10 years UPDATE 2017 Aggregate Production Change By State Red Lower production totals year over year Green Higher production totals year over year U S Aggregate Demand New Baseline 2013 2014 2015 2016est 2017est 2018est 2019est RESIDENTIAL 39 48 53 59 58 52 53 NONRESIDENTIAL 60 65 70 72 73 72 72 NONBUILDING 106 106 105 107 110 107 108 TOTAL 205 219 228 238 241 231 233 Yr Yr Ch 15 68 41 44 13 41 09 Note There is a small difference between our estimates of consumption and the USGS because of our own estimates in states where USGS does not report values due to competitive concerns 88 PIT QUARRY February 2017 pitandquarry com