US trade deficit widens sharply in May as capital goods imports hit record high

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.

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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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