Some more partially good news in this morning's trade data from BEA: January's trade deficit dropped by $3.8 billion to $41.8 billion. The not so good news port is that export were down $5.6 billion while imports were down $9.4 billion. The drop in both imports and exports is a troubling indicator of the state of the US and global economy. In addition, the good news is that the deficit in petroleum goods declined while the bad news is that the deficit in non-petroleum goods continues to increase.
In another piece of minor bad news, our surplus in pure intangibles declined slightly in January as exports dropped while imports grew. The surpluses in maintenance & repair services and in financial services declined as exports went down in both industries. The deficit in insurance services was slightly lower as imports declined. Net revenues from the use of intellectual property dropped slightly as revenues from foreign sources (exports) were basically unchanged while charges for the use of intellectual property paid out to foreign sources (imports) increased. The good news is that the surplus in business services finally increased after a long string of declines (revised data shows that the string of declines actually stopped in December with a slight increase).
Revised data shows that on an annual basis our intangibles surplus was up by 5.5% in 2014. All areas showed improvement except telecommunication which managed, however, to remain in surplus.
Our Advanced Technology deficit once again improved dramatically in January, dropping to $5 billion from $8 billion in December and $11.4 billion in November. And once again the improvement was due an $3 billion improvement in the Information and Communications Technology (ICT) deficit as imports dropped by $4 billion while exports were down $1 billion.
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 $9.9 billion in January compared with $7.0 billion in December. Again, much of this was due to the lower ICT imports.
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."