The May trade data released this morning was not good. The trade deficit increased to $42.3 billion, up from $40.3 billion in April. Exports grew by $3.5 billion in May while imports shot up by $5.5 billion. Once again, the increased deficit cannot be blamed on oil. As the chart below shows, our deficit in petroleum products shrank while our non-petroleum goods deficit increased. Rather than heading to a new sustainable economic "re-balancing," we appear to be going back to the same old trade flows. As the New York Times put it, the deficit was "led by a jump in imports from China that helped overpower the best month for exports since September 2008."
The jump in the deficit was unexpected. According to the Wall Street Journal, "Economists surveyed by Dow Jones Newswires had expected the deficit to contract to $38.9 billion in May."
Our intangibles trade surplus improved slightly in May after a small decline in April as export rose slightly faster than imports. The surplus grew in both royalties and private services as imports and exports increased in both categories.
Surprisingly our deficit in Advanced Technology Products was about the same in May as in April. Increased deficits in information and communications technologies and opto-electronics were offset by increased surpluses in aerospace and electronics. In all of these categories, both exports and imports 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.
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