The off highway equipment industry is a significant component of the nation's manufacturing base and a leader in providing innovative solutions to the global construction, agriculture, mining and forestry sectors. Over the past dozen years, the Association of Equipment Manufacturers (AEM) has periodically commissioned IHS Markit to quantify the economic contributions of the off highway equipment and ancillary products industry to the United States economy and provide enhanced detailed understanding of the industry's extensive supply chain by economic sector at the national and state/congressional district level. The previous study analyzed the industry's impact in 2016. Since then, the industry has continued to grow while riding the roller coaster of domestic and international policy and trade changes. The key findings of this study measure the economic contribution the industry makes in terms of jobs supported, value added (contribution to GDP), output (sales), labor income, and taxes paid within the broader economy.

Significance

IHS Markit estimates that $791 billion in total sales activity across the United States in 2019 was supported by off-highway equipment and ancillary products industry economic activity. $276 billion of the industry impact was generated by the direct sales activities of the industry, which includes equipment sales across the construction, agricultural, mining, and machinery industries. This direct sales activity generates an additional level of output generated by the equipment manufacturing supply chain. This indirect effect generated an additional $320 billion in sales across the entire supply chain, including all types of goods and services such as input materials to real estate and professional services. To generate this direct and indirect output, equipment companies and their suppliers pay significant wages to hundreds of thousands of employees, who in turn generate additional economic activity across the economy through their daily activities. This induced level of economic impact added an additional $195 billion. The combined output impact of $791 billion is 11.9% higher than the $707 billion in total output seen in 2016, for a CAGR of 3.8%.

Additional impacts from the equipment manufacturing industry in the United States

• The total direct, indirect, and induced employment contribution of the US off-highway equipment and ancillary products industry in 2019 totaled 2.8 million.
• Direct off-highway equipment and ancillary products industry jobs, combined with all employment supported in the industry's supply chain, would represent more than 12% of the US manufacturing employment base.
• The 2019 total employment is 10.4% above the 2.5 million total employment supported by the industry in 2016. The 264,000 additional jobs generated by the industry is equivalent to more than 7,200 jobs a month.
• In 2019, 477,000 US employees were directly involved with firms engaged in the production of off-highway equipment, resulting in a 9.5% increase above the 435,000 industry jobs in 2016.
• Direct employment grew over 4% on an annual basis from 2016 to 2018, but that growth slowed considerably in 2019, which saw direct employment increase only 1.2%—with all of the growth seen in the mining equipment sector.
• On an annual basis, the highest direct employment growth was seen in the mining equipment industry, which grew 6.0% annually. This compares to 2.0% annually for construction equipment and 0.9% for agricultural equipment.
• Jobs supported by the off-highway equipment and ancillary products industry represent nearly 2% of the US total employment base.
• Average US labor income per job within the off-highway equipment and ancillary products industry (both producers of end-use goods and services as well as the supply chain) amounted to just over $70,000—or approximately 35% above the national average—reflecting the highly skilled nature of the workforce.
• Industry-supported activity generated $53.7 billion in federal and state taxes. The $19 billion in state taxes would be enough to cover the per-pupil spending of more than 1.5 million students. The $34.7 billion in federal taxes will account for 1% of total collections in 2019.
• Texas continues to lead all states with 22% of total US industry-related employment. Illinois, Wisconsin, and Ohio follow with 9%, 7%, and 6% shares, respectively. Texas is also the only state within the top 10 to significantly outpace overall employment growth, as it saw 6% CAGR in total industry-related employment.
• The industry supports more than 1,000 jobs in 44 states, with 35 states seeing a total employment impact of more than 10,000. The top-11 states generate over 2 million jobs combined.

Posted 13 March 2020 by Scott Hazelton, Director, Construction, S&P Global Market Intelligence and

Shane Norton, Senior Principal - Economics & Country Risk Consulting, S&P Global