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Local Purchase Percentage (LLP) for a Commodity Output Event

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mrhaynes

My question concerns the interpretation of the Regional Purchase Coefficient (RPC) for a specific commodity.

We are currently modeling the impact of a large construction project. This model is very similar to one we built in 2023 for a comparable project. In our 2023 report, materials costs were modeled using a commodity output IMPLAN activity for the commodity Wholesale Services – Machinery, Equipment, and Supplies. 

In discussions with our client, they indicate that a very small amount of materials spending will occur locally (within the state of Minnesota). Their estimates range from about 2%-15%, depending on the material. Yet, IMPLAN's RPC for that commodity (wholesale services - machinery, equipment, and supplies) is 97%. 

This makes me question if we are using the correct commodity code? The materials being used for the project include concrete, rebar, steel, wood, and conductor materials. We don't have enough information on the specific materials to be able to model each item individually, so we thought the wholesale trade commodity would be a good catch all, but perhaps that's not the case.

Thank you for any guidance!

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    Nadege Ngomsi

    Hello Monica!

     

    When you select the commodity “Wholesale Services – Machinery, Equipment, and Supplies” you are telling the IMPLAN model that 100% of that money is going to pay for the operations of a local distributor (which includes wages, operations, etc). This is because the actual materials used to produce the good (like steel and machinery) was most likely manufactured outside of Minnesota. This commodity code also does not take into consideration the dollars that leave the local economy to pay the factory that actually made the steel. By selecting this commodity code, you are overstating the economic impact.

     

    First, we recommend choosing an industry code that best matches your use case. Look for codes that state activities like “construction of new commercial structures” or “construction of new power and communications structures” or any related codes.

     

    Second, we recommend creating your own custom spending pattern for the industry you have selected using your known percentages. This spending pattern automatically distributes your spending across materials based on national averages for that type of construction.

     

    Finally, we recommend the following resources for custom spending patterns to get you started: https://support.implan.com/hc/en-us/articles/16580444815515-Custom-Spending-Pattern and https://support.implan.com/hc/en-us/articles/30292404446875-Custom-Spending-Patterns-in-IMPLAN

     

    Thank you.

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    mrhaynes

    Good morning!

    I never received a response to this question... Just flagging this to see if someone can please help me out!?

    Thanks,

    Monica

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