Trade deficit swells to record $37.6 billion in May

WASHINGTON (AP) -- The United States trade deficit ballooned to a record $37.6 billion in May, reflecting Americans' ravenous appetite for foreign-made cars, TVs and clothes.

The Commerce Department reported Friday that the deficit was 4.1 percent higher than the revised $36.1 billion trade gap reported for April.

Many analysts were predicting a slight narrowing of the trade imbalance in May.

Separately, consumer prices edged up just 0.1 percent in June, after being flat in May, suggesting that inflation remains low and doesn't pose a risk to the economy.

The latest reading on the Labor Department's Consumer Price Index was better than the 0.2 percent increase in many analysts were forecasting.

The "core" rate of inflation -- excluding food and energy prices -- nudged up 0.1 percent in May, also better than expectations.

With inflation under wraps, the Federal Reserve has leeway to leave short-term interest rates -- now at 40-year lows -- alone for a while, economists say. Growing numbers of economists believe the Fed will keep rates unchanged through the rest of the year.

On Wall Street, stocks sagged. The Dow Jones industrial average was down 156 points and the Nasdaq index was off 12 points in the first hour of trading.

In the trade report, imports grew more than twice as fast as exports. Imports of goods and services increased 1.8 percent to $118.3 billion in May as the U.S. economic recovery helped to boost consumer demand for foreign-made goods.

Imports of automobiles and parts, and of consumer goods -- a broad category of items including TVs, VCRs, apparel, furniture and household appliances-- climbed to new monthly records.

Exports rose 0.7 percent to $80.6 billion in May. Although countries around the globe are regaining their strength after a worldwide slump, they are doing so more slowly than the United States, thus restraining demand for U.S. products.