US trade deficit widens sharply in May as capital goods imports hit record high
Reuters
Synopsis
The United States trade deficit significantly widened in May. Imports of capital goods reached a record high, driven by artificial intelligence investments. Exports experienced a decline, though petroleum shipments were strong. Trade has now subtracted from gross domestic product for two consecutive quarters. Current forecasts predict a modest economic growth rate for the second quarter.
APWashington: The U.S. trade deficit widened sharply in May as an artificial intelligence investment boom helped to drive imports of capital goods to a record high, suggesting that trade remained a drag on gross domestic product in the second quarter.
The trade gap jumped 42.2% to $77.6 billion, the Commerce Department’s Bureau of Economic Analysis and Census Bureau said on Tuesday. Economists polled by Reuters had forecast the deficit at $78.5 billion.
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Imports increased 3.3% to $395.3 billion, with imports of capital goods soaring to a record high $128.0 billion.
Businesses are spending heavily on AI, whose buildup is heavily reliant on imports. Exports dropped 3.2% to $317.7 billion, though shipments of petroleum were the highest on record amid the Middle East conflict. The U.S. is a net oil exporter.
Trade has subtracted from GDP for two straight quarters. The Atlanta Federal Reserve’s model is currently forecasting GDP increasing at a 1.2% annualized rate in the second quarter. The economy grew at a 2.1% pace in the January-March quarter.
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