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July 13, 2005
May trade in intangibles
The trade deficit declined slightly in May as exports increased and imports declined, the BEA reported this morning. However, the balance of trade in intangibles worsened slightly, with the surplus declining by $30 million to $7.2 billion. Imports of intangibles increased faster than exports; exports by .74% and imports by 1.5%.
And the deficit in Advanced Technology Products grew in May to $3.9 billion as imports increased and exports decline. The last monthly surplus in this category was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
Much of the improvement in the overall deficit was attributed to a decline in oil prices. However, as the New York Times points out:
the trade improvement was likely to be temporary because prices of crude oil have soared to record levels above $60 per barrel since May.
According to the Wall Street Journal:
Despite the deficit's drop in May, many analysts aren't hopeful about the trade gap because U.S. growth exceeds that of many of its trading partners.
Also, significant deficits are seen in the near-future by economists who point out the dollar has been rising against some foreign currencies this year after three years of greenback depreciation that hasn't improved the imbalance. A weaker greenback means exports are cheaper in certain overseas markets while some imported goods cost more in the U.S.
May also saw an increase in clothing and textile imports from China - a politically volatile item. And, even with the improvement in May, the deficit is running at a higher annual level than last year.
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.
Posted by Ken Jarboe at July 13, 2005 8:50 AM
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Posted by: tommy at July 6, 2006 1:00 AM