BEA announced this morning that the trade deficit for August improved somewhat. The deficit dropped to of $59.1 billion from the July figure of $61.3 billion, revised. Both exports and imports declined -- a clear sign of economic slowdown. The improvement in the deficit was imports declining more than exports. The decline in imports was helped by lower oil prices. But, as the New York Times notes, “the politically sensitive deficit with China increased as imports from that country hit a record.”
Our intangibles surplus also decreased in August to about $11.7, from $12.8 in July. Both receipts (exports) and payments (imports) of royalties increased in August – payments jumping by over $900 million. Exports of business services decline slightly while imports grew slightly.
Trade in Advanced Technology Products returned to normal after the anomalous jump in the deficit in July to over $7 billion, as aerospace exports returned to there normal level in August. The technology deficit in August was $3.2 billion – similar to previous months. 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.
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