US trade deficit surges 42% as AI investment boom drives capital goods imports to record $128B

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

WASHINGTON, July 7 (Reuters) - 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. 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. Reporting By Lucia Mutikani; Editing by Andrea Ricci Our Standards: The Thomson Reuters Trust Principles., opens new tab

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. 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. 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.

U.S. trade deficit expands in May amid jump in capital goods imports By Investing.com

Investing.com - The U.S. trade deficit widened in May, as soaring expenditures on artificial intelligence fueled a jump in capital goods imports to record levels, raising questions over the outlook for second-quarter growth. Imports increased by 3.3% to $395.3 billion, as the U.S. brought in more items like semiconductors and computer accessories to underpin the infrastructure needed for the AI boom. Businesses are spending heavily on building out AI-optimized data centers and filling them with high-end semiconductors. Capital goods imports soared to an all-time peak of $128.0 billion against this backdrop. Exports of computers and other electronic equipment, on the other hand, declined in May. Overall exports also fell by 3.2% to $17.7 billion, even as petroleum shipments were the highest on record. The closure of the Strait of Hormuz, a vital waterway partially located off Iran's southern coast, shortly after the start of a joint U.S.-Israeli assault on Iran has bolstered demand for U.S. oil exports. Crimped supply chains out of the Middle East have pushed up prices on products from the region, benefiting oil exporters elsewhere, including in the United States. Taking into account both imports and exports, the U.S. trade deficit expanded by 42.2% to $77.6 billion, the Commerce Department's Bureau of Economic Analysis said on Tuesday. Economists had forecast the deficit would stand at $78.3 billion. "The sharp widening in the trade deficit in May is not quite as bad as it looks in terms of its implication for GDP but still points to net trade providing a significant drag in the second quarter," said Bradly Saunders, North America Economist at Capital Economics, in a note.