June trade in intangibles

This morning’s trade data from BEA was something of a shocker: the deficit fell by $9.9 billion to $34.2 billion in June. Economist had been expecting a deficit of $43.5 billion. Exports were up by $4.1 billion while imports were down by $5.8 billion — a good combination. Part of the improvement was due to lower imports of petroleum goods. But imports of non-petroleum goods were also down and exports up. The better than expected news means that GDP estimates for the 2nd quarter are likely to be revised upward from the initial estimate of 1.7% (see earlier posting).
Our surplus in pure intangibles trade more of a mixed bag. Exports of business services dropped slightly but imports dropped more resulting in a slight increase in the surplus. Royalty receipts (exports) rose slightly more than royalty payments (imports). As a result, the intangibles surplus basically remained the same, up by only $38 million in June to $15.8 billion
After surging for the last couple of months, our deficit in Advanced Technology showed a dramatic drop to $3.4 billion in June from almost $7.2 billion in May. Almost every category showed improvement with the most dramatic in information and communications technology, where imports dropped by $1 billion and exports increased by by almost $900 million. Exports of aerospace grew by almost a $1 billion as well. 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.
Advanced Technology goods also represent trade in intangibles. These goods are competitive because their value is based on knowledge and other intangibles. While not a perfect measure, Advanced Technology goods serve as an approximation of our trade in embedded intangibles. Adding the pure and embedded intangibles reveals an overall surplus of $12.5 billion
Intangibles trade-Jun13.png
Intangibles and goods-Jun13.png
Oil good intangibles-Jun13.png

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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