June trade in intangibles

As expected, the US trade deficit grew in June according to this morning’s data from BEA. Exports increased by $2.4 billion while imports were up even more at a $3.5 billion increase. As a result, the monthly trade deficit rose from $26 billion in May to $27 billion in June. The deficit was not as big as some feared, however. As the Wall Street Journal reports, “Economists surveyed by Dow Jones Newswires had estimated a $28.7 billion shortfall.” Rising oil prices were the cause of much of the increase. Interestingly imports of consumer goods continued to decline. Automotive imports increased.
On the positive side, our surplus in intangibles increased ever so slightly in June–by $55 million. Once again, exports and imports of private business services were up while both inflows (exports) and outflows (imports) of royalty payments were down. As I noted last month, the intangibles trade surplus has been essentially flat for the quite some time.
Our deficit in Advanced Technology Products worsened however. The deficit grew by over $1 billion in June to $4.6 billion as imports of information and communications technologies and opto-electronics rose. Again, this increase may be due to (and a sign of) a recovering economy. 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.
Intangibles trade-Jun09.gif

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.

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