September trade in intangibles

September’s trade numbers are out and the deficit is growing again — up $3.1 billion to $41.8 billion. Economists had predicted only a slight increase to $39 billion. The bad news is that exports dropped by $0.4 billion while imports were up $2.7 billion. That may indicate some increase in domestic demand but a slowdown in our trading partners. The deficit increased in both petroleum and non-petroleum goods.
Trade in business services followed the same pattern with imports up and exports down slightly. However, royalty receipts (exports) were up more than royalty payments (imports). The result was that our trade surplus in pure intangibles stayed roughly at $16.1 billion.
The other bad news is a large increase in the Advanced Technology deficit to $8.1 billion. It unfortunately looks like August’s decline to $5.9 billion was not sustainable — as the September deficit mirrors July’s $8.3 billion deficit. Much of the increased deficit was due to a surge in imports of information and communications technology coupled with a slowdown in aerospace exports.
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 $8 billion in September compared to $10.2 billion in August.
Intangibles trade-Sept13.png
Intangibles and goods-Sept13.png
Oil goods intangibles-Sept13.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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