Good news as well about the August trade deficit. The deficit continued its downward trend by dropping in August to $40.1 billion from $40.3 billion in July (revised). August exports were up by $0.4 billion while imports were up by only $0.2 billion. Economists had expected an increase to $40.8 billion. While exports reached a record level, the improvement in the overall deficit was due to a decline in our petroleum goods imports. The deficit in non-petroleum goods actually grew slightly (see last chart below).
The surplus in pure intangibles also grew in August to $14.1 billion from $13.9 billion in July. Exports rose and imports fell. Net revenues from the use of intellectual property increased as revenues from foreign sources (exports) grew while charges for the use of intellectual property paid out to foreign sources (imports) declined. The other area of major improvement was maintenance & repair services where exports jumped and imports declined. The surplus in financial services improved only a small amount as exports of grew slightly more than imports. Business services exports also rose but imports of those services grew even faster resulting in a lower surplus in this category — the surplus in business services has declined now for 7 months in a row. In telecommunications, computer, and information services, exports fell and imports rose leaving us with a slightly higher trade deficit in this area. In insurance services, exports were down but imports fell more causing a decline in this deficit.
Our Advanced Technology deficit also improved significantly in August, dropping to $4.5 billion from $6.9 billion in July. Exports of aerospace technology and information and communications technology increased while imports of information and communications technology dropped. These two factors accounted from most of the overall improvement.
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 $9.5 billion in August, up from $7.0 billion in July.
Note: I am now reporting the trade data using the new BEA classifications for services trade, which breaks services into more categories. In the past, the intangible trade data was the sum of Royalties and License Fees and Other Private Services. Under the new classification system, intangibles trade data is the sum of the following items: maintenance and repair services n.i.e. (not included elsewhere); insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services.
Charges for the use of intellectual property n.i.e. is simply a renaming of Royalties and License Fees. This includes 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.
Maintenance and repair services n.i.e., financial services, and insurance services, were previously included in Other Private Services. Telecommunications, computer, and information services is a combination of those two items (telecommunications and computer & information services) that were also previously included in Other Private Services. Three categories previously in Other Private Services — education-related and health-related travel and the expenditures on goods and services by border, seasonal, and other short-term workers — were removed and reclassified to travel. The new category of other business services is a continuation of the older category Other Private Services with those components removed.
Thus, other business services includes categories such as advertising services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; and industrial engineering services. It also includes personal, cultural, and recreational services which includes fees related to the production of motion pictures, radio and television programs, and musical recordings; payments or receipts for renting audiovisual and related products, downloaded recordings and manuscripts; telemedicine; online education; and receipts or payments for cultural, sporting, and performing arts activities.
For more information on the changes, see the March 2014 Survey of Current Business article, “The Comprehensive Restructuring of the International Economic Accounts: Changes in Definitions, Classifications, and Presentations.”