March Trade in Intangibles

The March BEA trade data released this morning showed a break in the recent trend toward a smaller deficit as the deficit increased slightly by $1.5 billion. Exports declined by $3.0 billion while import dropped by $1.6 billion. The decline in imports was smaller than in previous months - perhaps signaling a stabilizing of consumer spending. Imports of consumer goods actually increased in March while imports of industrial supplies and materials and capital goods declined.

However, the increased deficit was due in part to rising oil imports and prices. As the Wall Street Journal pointed out:

The value of crude oil imports increased in March to $11.98 billion, from $10.00 billion in February. The Commerce report's average price per barrel of imported crude in March rose by $2.14 to $41.36 from $39.22. It was the first increase in eight months. Last year, imported oil topped at $124.66 billion in July, and then started a deep slide.
As for the March volume of oil imported, it rose to 289.69 million barrels from 254.87 million in February.

The decline in exports is also not good news - and indicates that February's increase in exports may not be sustainable. Exports peaked in July 2008 and have declined steadily ever since (not withstanding February's increase).

The intangibles balance was essentially unchanged. Revenues (exports) and payments (imports) of royalties both declined; exports and imports of business services increased. A slight increase in the business services trade surplus was offset by a slight decline in the trade surplus in royalties.

The trade deficit in Advanced Technology Products reversed in March, growing by $1.2 billion as aerospace exports declined and imports of information and communications technologies (ICT) increased. 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.