March trade in intangibles

Some good news from BEA this morning on trade: the trade deficit declined by $1.5 billion to $40.4 billion. Exports were up by $3.9 billion while imports grew by only $2.5 billion. The news wasn’t quite a good as hoped for as economists had predicted that the deficit would fall to $40.0 billion. The increase in exports was particularly good news, however. And could result in an upward revision to the 1Q GDP numbers. The not so good news hidden in the data is that the overall improvement in the deficit was due to a decline in the deficit in petroleum goods. The trade deficit in non-petroleum goods actually increased slightly (see chart below). UPDATE: Since the trade deficit was larger that what BEA projected in its GDP calculation, economists now believe that 1Q GDP will be revised downward to show a slight economic contraction.
Our trade surplus in pure intangibles also improved. The March surplus increased by $915 million to $16.4 billion. Reversing last months surge, royalty payments (imports) declined. Royalty receipts (exports) continued to increase. As we mentioned last month, we suspected that the February rise in royalty payments was due to payments for the television rights to the Winter Olympics. The trade surplus in business services grew as exports rose faster than imports.
The deficit in Advanced Technology reversed its trend – to grow slightly in March after declining dramatically in recent months. A surge in information and communications technology imports was offset by an increase in aerospace technology 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 shows an overall surplus of approximately $12.6 billion, up from $12.3 billion in February.
Intangibles trade-Mar14.png
Intangibles and goods-Mar14.png
Oil goods intangibles-Mar14.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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