Washington: 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.Read more: Global Market: China emerges as diversification bet for investors amid market volatilityImports 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.Read more: US service sector growth dips in June; employment rebounds after months of contraction
US trade deficit widens sharply in May as capital goods imports hit record high
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.
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