After a good month in December, the US trade deficit turned slightly in January, as the BEA trade data showed an increase of $300 million— to $58.2 billion in January from December’s revised $57.9 billion. Both imports and exports increased, but imports great faster than exports: exports were up $2.4 billion and imports were up $2.7 billion. The dollar amount of oil imports continued to grow as both the price and volume increased. On a politically sensitive note, the deficit with China also continued to grow. The number was expected to be worse. According to the Wall Street Journal, “Economists surveyed by Dow Jones Newswires had estimated a $59.75 billion shortfall.”
Our intangible trade balance in January grew by $226 million to $11.2 billion. Every category—imports and exports, royalties and business services—grew. In both royalties and business services, exports increased more than imports. The royalties’ surplus grew by $56 million and the business services surplus by $168 million.
Note: our intangibles surplus covers approximately 45% of our consumer goods deficit.
The deficit in Advanced Technology Products increase in January to $3.5 billion, as imports declined dramatically and exports grew. The big change was a decline in aerospace exports. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
The big news this month is the revisions for 2007, especially the second half of the year. BEA’s latest data on “other private services” (what I label “business services”) exports increased dramatically. In July, August and September, the data was revised upwards by $500 to $857 million. In October, November and December, the numbers were revised upward by over $1 billion. Likewise, imports were also revised upwards for those months—the biggest upward revision being a $720 million revision in December.
Royalty payments were also revised for the second half of the year, with royalty receipts (exports) revised upward by an average of $140 million per month and royalty payments (imports) revised downward by an average $13 million per month.
Consequently, our intangibles surplus for the second half of 2007 is on average $560 million per month greater than was previously reported. As a result of these revisions, I am updating the charts I published last month for annual growth in intangibles trade (see chart 2 below) and the percentage of intangible trade in our total international trade (see chart 3 below).
These revisions raise the obvious questions of the ability of our statistical system to cope with the I-Cubed Economy. For the months of November and December, this represents an increase in business services exports of over 7%. The BEA release states that the revisions are due to “the incorporation of more comprehensive and revised quarterly and monthly data.” BEA has made previous revisions to the business services data, as high as a change of $1.5 billion to December 2006 and March 2007 exports.
The Commerce Department recognizes the problem. Improving data on intangibles and services was one of the recommendations of the report of the Advisory Committee on Measuring Innovation in the 21st Century Economy (see also my earlier posting). BEA is undertaking a number of activities to improve the data on intangibles and the knowledge economy (see their strategic plan). In fact, last year, they instituted a new quarterly survey BE-125, Quarterly Survey of Transactions in Selected Services and Intangible Assets with Foreign Persons (see also the list of BEA survey’s on International Services Transactions). However, those surveys are quarterly—and the trade numbers are released monthly. So, for awhile, expect to see continued revisions in the intangible trade statistics.
Note: we define trade in intangibles as the sum of “royalties and license fees” and “other private services”. The BEA/Census Bureau definitions of those categories are as follows:
Royalties and License Fees – Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term “royalties” generally refers to payments for the utilization of copyrights or trademarks, and the term “license fees” generally refers to payments for the use of patents or industrial processes.
Other Private Services – Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term “affiliated” refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise’s voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.