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July 12, 2006
May trade in intangibles
Once again, this morning's BEA trade data showed a widening trade deficit. But our surplus in intangibles trade improved slightly, rising by $90 million to $8 as receipts (exports) for royalties and exports of business services increased faster than imports of business services and payments (imports) for royalties.
The overall trade deficit increased in May by $0.5 billion to $63.8 billion as imports increased faster than exports. This was unlike last month, however, when exports actually declined. As the Wall Street Journal reported:
The May trade deficit was smaller than Wall Street predicted. A Dow Jones Newswires and CNBC survey of 18 economists had forecast a deficit of $65.30 billion. While the increase was smaller than the 2.9% rise that economists had been expecting, it still represented the sixth largest deficit in history.
. . .
The nation's bill for all energy-related petroleum products rose to $27.91 billion from April's $23.40 billion. Imports of capital goods like medicinal equipment increased by $171 million. Purchases of cars and parts made abroad fell by $522 million. Consumer goods imports -- including clothing -- tumbled by $40 million. Imports of foods and beverages decreased by $146 million.
U.S. exports rose by 2.4% to $118.66 billion in May from $115.93 billion in April. Sales increased by $803 million for capital goods, including civilian aircraft. Exports rose by $524 million for consumer goods, like diamonds. Sales of industrial materials such as precious metals were up $766 million. Exports of food and beverages increased by $387 million. Sales of autos and parts fell $120 million.
The deficit in Advanced Technology Products also increased in May by $1.2 billion to $2.9 billion -- again as imports rose faster than exports. The increase was due mainly to increased deficits in information & communications, life sciences and bio-technology. Aerospace showed an increased surplus due to higher exports.
The increase in our intangibles surplus is good news - but not good enough to offset our huge deficit in tangible goods.
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 12, 2006 8:59 AM
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