Good news on the trade front as this morning's BEA trade data showed a slight decline in the trade deficit. June's deficit was $56.8 billion compared to $59.2 billion for the revised May data. Exports increased by $6.4 billion while imports grew by only $3.9 billion. The deficit was less than expected. As the Wall Street Journal reports, "Economists surveyed by Dow Jones Newswires had estimated a $62.70 billion shortfall." The lower deficit number is also good news for the upcoming GDP revision - since a smaller deficit boosted the economic growth figure (see earlier posting).
The intangibles trade surplus also improved slightly as export rose faster than imports for both royalties and business services. The intangibles trade surplus rose by $247 million to $13.5 billion. As I posted earlier, the Institute for Supply Management (ISM) New Export Orders Index declined in June from the May level, indicating a slow down in services exports. However, the ISM service index includes service such as transport and wholesale activity which we do not consider as intangibles trade.
The deficit in Advanced Technology Products increased slightly in June to $3.9 billion. The change was almost completely due to a $326 million deficit in nuclear technology. The other categories had only minor gains or losses or remained relatively unchanged. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
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.