The trade deficit unexpectedly jumped up by $3 billion to $42.3 billion in February from $39.3 billion in January, according to BEA's data release this morning. February imports were up by $1 billion and export down by $2 billion. Economists had expected the deficit to fall to $38.5 billion. The slowdown in exports is an especially unwelcome event, but not necessarily one that is seen as continuing.
Our trade surplus in pure intangibles also moved the wrong way, declining by $688 million to $15.5 billion. The decline was solely due to a surge royalty payments (imports) that swamped the increase in royalty receipts (exports). The trade surplus in business services grew as exports rose faster than imports. At least part of the increase in royalty payments was the result of payments for the television rights to the Winter Olympics.
The good news is that the deficit in Advanced Technology continued to improve, declining by almost $1.5 billion to $3.2 billion. And once again the improvement was due in large part to a drop information and communications technology imports. A more worrisome fact was the decline in the trade surplus in aerospace technology as imports rose and exports fell slightly.
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 $12.3 billion, up from $11.5 billion in January.
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.