U.S. trade gap widens on record capital goods imports in May
A surge in business spending tied to artificial intelligence is pushing U.S. imports higher and keeping trade a headwind for economic growth in the second quarter. In May, the widening deficit comes as capital goods imports reach a record level and exports decline despite strong petroleum shipments.
Highlights
- The U.S. trade deficit widens 42.2% in May to $77.6 billion, close to the $78.5 billion Reuters consensus estimate.
- Imports rise 3.3% to $395.3 billion, with capital goods imports hitting a record $128.0 billion due to surging business spending on artificial intelligence-related equipment.
- Exports decline 3.2% to $317.7 billion as trade continues to drag on GDP, and the Atlanta Fed forecasts Q2 GDP growth at 1.2% annualized after 2.1% in Q1.
May trade figures and import surge
As reported by Reuters, citing the Commerce Department's Bureau of Economic Analysis and Census Bureau, the U.S. trade deficit jumps 42.2% in May to $77.6 billion. That is wider than April and close to the $78.5 billion deficit forecast by economists polled by Reuters.Imports increase 3.3% to $395.3 billion, with capital goods imports soaring to a record $128.0 billion. The gain reflects heavy business spending on artificial intelligence, an investment cycle that relies significantly on imported equipment and related goods.
Growth outlook and export trends
Exports fall 3.2% to $317.7 billion in May, though petroleum shipments reach a record high amid the Middle East conflict. The U.S. remains a net oil exporter, limiting some of the weakness from other export categories.Trade subtracts from gross domestic product for two straight quarters and continues to weigh on second-quarter activity. The Atlanta Federal Reserve's model currently forecasts GDP growth at a 1.2% annualized rate in the second quarter, after the economy grows at a 2.1% pace in the January-March period.
Our earlier coverage of BlackRock’s launch of the iShares Nasdaq 100 ETF explained how the AI-led rally has intensified competition among funds tracking the Nasdaq-100. We noted that strong investor demand for large-cap technology exposure is pushing issuers to differentiate on access and pricing, adding pressure across the U.S. ETF segment.
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