This morning's trade data for October shows the deficit declining by $2.4 billion to $40.6 billion. Exports were up by $3.4 billion to a record level of $192.7 billion while imports grew by only $1.0 billion to $233.3 billion. The drop was about what economist had expected; they predicted a deficit of $40 billion. The deficit declined in both petroleum and non-petroleum goods.
Our trade surplus in pure intangibles also improved, rising to $16.1 billion as exports grew faster than imports. [Note: while this is the same level as reported last month, it is an increase over the revised data for the past 6 months released today.] Exports of business services grew faster than imports and royalty receipts (exports) were up more than royalty payments (imports).
Unfortunately, our Advanced Technology deficit grew again in October by $1.7 billion to $9.8 billion. There was an increase in life sciences and opto-electronics imports coupled with a slowdown in aerospace exports and an increase in aerospace imports. The key sector of information and communications technology remained roughly the same as last month.
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 $6.3 billion in October, compared to $7.8 billion in September (revised).
BEA's October release also revises the data for the past 6 months. Exports of business services were revised downward by $100 to $200 million per month and imports revised downward by over $500 million per month (slightly over $300 in April). As a result, the surplus in business services was revised upward. However, royalty payments (imports) were revised upward and royalty receipts (exports) revised downward so that the royalty surplus was revised downward. The result was a revision upward in the overall intangible surplus.
While the changes only amount to a 1.5% change at most, this revision changes the dynamics of the surplus. The surplus actually shrank slightly in July and August while growing in September. The previous data showed just the opposite.
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.