Trade gap hits highest level in 18 months

The U.S. trade gap widened unexpectedly in May, hitting its highest level in 18 months as demand increased for imported cars and consumer goods. 

The trade deficit increased 4.8 percent to $42.3 billion up from $40.3 billion revised in April, the largest level since November 2008, the Commerce Department reported Tuesday. 

Demand for American goods and services increased by 2.4 percent to $152.3 billion while imports rose 2.9 percent to $194.5 billion in May, the highest level since October 2008, behind increases in cars, computers and industrial machinery.

The European debt crisis has raised concerns that demand will drop for American exports, just as the U.S. manufacturing sector kicks into high gear. 

Imports from Europe rose 3.2 percent, as the deficit with the European Union increased 7.5 percent to $6.2 billion, while U.S. exports received only a 1.9 percent boost in the region.

The trade deficit is running at an annual rate of $474.8 billion through May, up 26.6 percent from a $374.9 billion deficit for 2009. 

The deficit with China increased to $22.3 billion in May, a 15.4 percent increase from the April deficit, to the highest level since October. 

The trade imbalance with China has jumped 10.2 percent from the same period last year.