This morning's July trade data from BEA contain some welcome good news. The trade deficit shrank somewhat -- down to $42.8 billion from $49.8 billion in June, revised. Exports were up by $2.8 billion and imports were down by $4.2 billion. The improvement was in the goods category. As the chart below shows, our petroleum trade deficit was steady. The drop in the trade deficit was greater than expected. According to the Wall Street Journal, "Economists surveyed by Dow Jones Newswires had predicted a $47 billion trade gap."
While this is good news for the long run, the drop in imports may be due to lower consumer demand -- which is not good in the short term. The jump in exports is partly due to a surge in overseas sales of commercial aircraft -- which may not be sustainable. Exports of automotive vehicles and parts, food, feed, and beverages, and consumer goods declined.
Our intangibles trade surplus was essentially unchanged in July at $12.2 billion. The bad news is that exports of private services declined slightly and imports rose -- so the trade surplus in private services declined. These changes were offset by increased royalty payments coming in (exports) and smaller royalty payments going out (imports).
In keeping with the regular schedule of revisions, the intangibles trade data for the first half of 2010 was modified slightly to reflect better information. Data on royalty payments was revised very slightly. Private services data revisions show an increase in exports of on average $140 million per month and a decrease in imports of on average $185 million per month. As a result, the intangibles trade surplus was revised upwards for the first half of 2010 by on average $255 million per month.
Our deficit in Advanced Technology Products also improved in July as exports increased and imports slightly decreased. June's deficit of $8.4 billion was the worst monthly deficit since the government started publishing data specifically on Advanced Technology Products. The July deficit of $6.8 billion was smaller in comparison -- but still higher than May's deficit of $5.8 billion. 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.