January trade in intangibles – and 2013 revisions

In other economic news this morning, the trade deficit in January remained basically the same, according to the BEA — rising to $39.1 billion from December’s $39.0 billion. Exports were up by $1.2 billion but imports were up by $1.3 billion. Economists had expected a deficit of $38.4 to $38.5 billion.
The hidden good news is that the deficit in non-petroleum goods improved, as the chart below shows. The hidden bad news is that the deficit in petroleum goods worsened, due to an increase in imports. Imports of non-petroleum goods actually declined. Had the petroleum goods deficit remained the same, the overall deficit would have improved by almost $3.7 billion.
Our trade surplus in pure intangibles grew slightly in January. Exports of business services grew more than imports of business services and royalty receipts (exports) rose faster than royalty payments (imports).
Our deficit in Advanced Technology continued improved in January, dropping by $1.3 billion to $4.7 billion after a drop of almost $3.3 billion in December. Once again the improvement was due in large part to a $3 billion drop information and communications technology imports – likely a post-Christmas phenomena. Interestingly, imports of life sciences technology increase by almost $600 million in January while both imports and exports of aerospace technology declined.
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 shows an overall surplus of $11.5 billion in January compared to $9.9 billion in December.
The other part of the story is the revisions to the data for 2013. The new annual data is presented in charts below. The revision increased imports of business services by almost $2.7 billion over the last six months of the year. Exports of business services were also revised upward by $569 over the period while by around $100 million for those months. Royalty receipts (exports) and royalty payments (imports) were also revised slightly downward. The net result is that the surplus in intangibles is about $2.1 billion less than previously reported for those months – due mostly to the revision in business service imports. The revision also change the story about the trend lines slightly. Whereas before December recorded a slight decline in the surplus, the surplus actually grew that month. The reverse was true for September where the original data showed growth in the surplus whereas the revisions show a decline.
Intangibles trade-Jan14.png
Intangibles and goods-Jan14.png
Oil goods intangibles-Jan14.png
Intangibles trade-2013 post Jan revisions.png
Intangibles and goods-2013 post Jan revisions.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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