The quarterly current account data for the US came out this morning and the numbers were better than expected – specifically a rise in income payments. According to the BEA:
The balance on income shifted to a surplus of $1.9 billion in the first quarter from a deficit of $2.2 billion in the fourth.
Investment income Income receipts on U.S.-owned assets abroad increased to $140.1 billion from $130.4 billion. “Other” private receipts (which consists of interest and dividends) increased strongly, and direct investment receipts also increased.
Income payments on foreign-owned assets in the United States increased to $136.6 billion from $131.0 billion. A strong increase in “other” private payments (which consists of interest and dividends) and an increase in U.S. Government payments (which consists of interest) more than offset a decrease in direct investment payments.
From the point of view of our pure intangibles trade, there was nothing new in the report – since royalties and business services are already reported monthly as part of the trade figures.
The rise income payments did spark a minor renewal of the dark matter debate. Brad Selzer re-iterated is view that the dark matter thesis doesn’t hold up:
But the big gains came from foreign direct investment. The earnings of US firms abroad increased by $2.6b in the first quarter (v. q4). But even more importantly, the earnings for foreign firms fell by $3.7b. The net swing was $6.3b or so — overwhelming the US interest bill.
Dark matter (though not from Disney)?
Continued gains from the export of US intangibles (just not by Disney)?
Or bad data?
Mike Mandel touted the “Return of Dark Matter”:
What a nice surprise this morning. I looked at the latest current account data, and discovered, lo and behold, that in the first quarter the U.S. earned more money on its foreign investments than foreigners earned on their investments in the U.S.
Not bad for the world’s biggest debtor, eh?
As those of you who have been reading this blog know, I take Brad’s side on this.
Sorry, Mike, but I didn’t hear your talk about the $2.2 billion income deficit in the 4th quarter. And simply asserting that the greater inflow of income over the outflow of payments is due to some mysterious “dark matter” doesn’t make it so. There are just too many more plausible explanations for this occurrence.
I agree that our data is bad and we don’t really have a handle on the flow and the values of intangibles. But we can’t wish away our huge current account deficit and our grow indebtedness on some dark matter.