On the surface, the news from BEA's trade data for March sounds good. The deficit dropped $4.8 billion to $38.8 billion. Economists surveyed by Bloomberg had expected a $42.3 billion deficit. However, a look at the details provides some not-so-good news. Exports were down by $1.7 billion while imports dropped by $6.5 billion. Exports were down in every category (except "other goods") and imports were down in all but "food, feeds, and beverages" and "other goods." As the chart below indicates, the deficit improved in both petroleum and non-petroleum goods -- with imports and exports declining in both categories.
Thus, the data suggests a general and overall slowdown of economic activity in March. However, because the deficit declined in March, this should push the 1Q GDP number up in the next revision (as the deficit is a negative in the GDP calculations).
Just the opposite was true for our trade in intangibles, with economic activity expanding as both import and exports grew. But the intangibles surplus grew by only $29 million in March. Exports of business services rose slightly more than imports and royalty receipts (exports) rose slightly more than royalty payments (imports).
The story was also a little difference for Advance Technology Products - where the deficit declined by almost $1.6 billion with both exports and imports growing. The improvement in the deficit was due largely to a rise in aerospace exports. Exports also surged somewhat in electronics and in information and communications technology (ICT). The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
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.