Today's BEA's release of the April trade data is sure to complicate a confusing economic picture. While last month's employment numbers were disappointing, yesterday's survey of economic conditions from the Fed (the "Beige Book") noted slow improvement. Today's trade data (for two months ago) shows a weaker economy. The deficit increased slightly, from $40.0 in March to $40.3 in April. But both exports and imports slightly declined: exports were down my $1.0 billion and decline by $0.8 billion. Economists had expected a larger deficit - probably based on an assumption of increased imports. Interestingly, the increased deficit cannot be blamed on energy imports -- as the deficit in petroleum products actually improved.
Our intangibles trade surplus also declined slightly in April. However, both imports and exports increased. The very slight decline in the overall surplus was due to slightly higher imports of private services. The surplus in royalties actually increased. Most worrisome is that there are once again major revisions to the data (as will be discussed below).
Our deficit in Advanced Technology Products worsened again in April after also increasing in March and February. Following the overall trend, exports and imports declined. This is especially worrisome after March's increases. The declines were generally across the board, but especially noticeable in information and communications technologies. 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.
The other part of the story is the annual revisions. As I reported in March, when the January trade figures were released, the previously published data for 2009 were revised to show higher levels of exports and lower levels of imports in the second half of the year. As a result, the intangibles trade surplus for 2009 is $4 billion higher than previously reported.
Now with this second revision to the data, the opposite appears to be true. Imports have been revised up, especially in private services. Therefore the surplus is lower than previously reported. For example, imports of private services for December were originally reported in February to be about $13.2 billion. That was revised in March to be a little over $13.05 billion. Now it is reported to be almost $14.6 billion.
Once again, I appreciate the difficulties in tracking these numbers, and appreciate BEA's efforts to get the most accurate data. But these substantial revisions are worrisome.
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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