Intangibles trade surplus continues to grow … but trend in Business Services is worrisome

The U.S. trade deficit rose ever so slightly in February, according to data released today by the Bureau of Economic Analysis (BEA). The deficit was $68.9 billion, up $1.3 billion from January’s revised level of $67.6 billion. Exports grew slightly faster than imports, but the total value of imports grew more than exports.

The trade surplus in intangible continued to grow as exports increased faster than imports. As the third chart below shows, the trends in the major components are mixed. After some positive movement in the growth in the size of the deficit in Insurance Services, the last 2 months saw an increase in the deficit in this sector. On the other hand, the surplus in Financial Services grew over the past 2 months, reversing the trend of shrinking surpluses in this sector that we have seen in the second half of 2023. Charges for the Use of Intellectual Property continues to be a steady contributor to the overall Intangibles surplus.

The disturbing news is the continuing decline in the surplus in Business Services. As the last chart shows, Business Services has been a steady contributor to the Intangibles trade surplus. Since COVID, export growth has stagnated, which points to a decline in the competitiveness of the sector. And is bad news for the U.S. economy as a whole.