News this morning from BEA is that the U.S. trade deficit dropped by a mere $0.2 billion in October to $43.4 billion. Exports grew slightly faster than imports: exports up by $2.3 billion with imports up $2.1 billion. However, the deficit in petroleum goods grew by $1.2 billion due to a drop in exports; petroleum goods imports actually declined. Economists had been expecting a drop in the overall deficit to $41.2 billion.
The surplus in pure intangibles grew by $183 million in October to a level of $14.2 billion as exports generally grew faster than imports. The surpluses in maintenance & repair services and financial services improved while the deficit in insurance services increased. The surplus in business services again declined, for the 9th month in a row. Exports of business services continue to grow but imports of those services grew even faster. Net revenues from the use of intellectual property increased as revenues from foreign sources (exports) grew faster than charges for the use of intellectual property paid out to foreign sources (imports).
Our Advanced Technology deficit also improved slightly in October, dropping to $9.2 billion from $10.5 billion in September. Exports of aerospace technology and information and communications technology were up but imports of information and communications technology also increased.
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 $5.1 billion - up from $3.6 billion in September.
Today's BEA release also includes revised data for April through September. As a result, the intangibles surplus was increased by over $1 billion for those 6 months. This change was due to an upward revision of exports of intangibles of $2.7 billion and a upward revision of imports of $1.6 billion. These revisions remind us of how tenuous our measurements are of intangibles and the need to continue to improve both our data collection and measurement frameworks in this new intangible economy.
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."