This morning's data released by the BEA shows a worsening of our overall trade deficit - growing by a billion dollars from $58 billion to $59 billion monthly. Much of this is due to rising energy prices.
But, the surplus in our balance of trade in intangibles actually increased in August due to an increase in exports of business, professional, and technical services, insurance services, and financial services (labeled as "other private services" - see definition below). The intangibles surplus grew by almost $270 million to $6.7 billion. This is the first month this year with an increase in the surplus in intangible trade. Up until August, every month in 2005 had recorded a worsening trade balance in intangibles
Even so, the improved balance in intangibles is utterly swamped by the growing monthly deficit overall.
The deficit in Advanced Technology Products narrowed somewhat in August to $3.3 billion (from a deficit of $4.2 billion in July) as exports rose much greater that the increase in imports. 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.
As I've said when I started publishing this data earlier this year, intangibles, in and of themselves can not offset our huge and growing deficit in goods. The power of intangibles is how they re-invigorate all sectors of the economy. Utilizing that power to transform manufacturing is the only way we will get our dangerous trade deficit under control.
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.
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