NEW YORK (CNN/Money) - The U.S. trade deficit widened to a record $37.6 billion in May, the second consecutive monthly record increase, adding to jitters about the pace of an economic recovery and continued weakness of the dollar.

The May deficit is far wider than the revised $36.1 billion record figure posted in April, the Commerce Department reported. Economists expected the deficit to fall to $35.3 billion, Briefing.com said. The figure reflects Americans' strong appetite for imported autos, TVs, clothes and other items.

Separately Friday, the Labor Department said its consumer price index, which measures retail prices paid by consumers, rose 0.1 percent in June after holding steady in May and reaffirming that inflation remains a distant threat. Economists expected a 0.1 percent rise in the CPI, according to Briefing.com.

The rise in the trade deficit, normally considered a ho-hum figure by economists, has taken on new significance in recent days given the spate of large-scale corporate accounting scandals such as Enron and WorldCom, and last September's terrorist attacks, which have hurt overseas investment in the United States.

Investments by other countries in the U.S. have typically offset any widening in the trade deficit.

The unexpectedly larger trade gap put more pressure on the U.S. dollar, which has been in a slump in recent months in part because of falling stock prices.

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Though a weaker dollar can offset the effects of ballooning imports, that has not happened, mainly because overseas companies are not altering their production schedules as they expect the dollar to bounce back in the near future, said James Annable, chief economist at WingspanBank.com.

"There are enormously long lags from a change in exchange rates to impact on production and employment," Annable said. "...The dollar has already weakened and frankly this kind of move isn't going to matter very much."

The trade deficit report showed imports grew more than twice as fast as exports. Imports rose 1.8 percent to $118.3 billion while exports rose 0.8 percent to $80.6 billion.

While a surge in imports usually points to stronger domestic demand -- good news for the economy -- the latest jump could be skewed by importers' fear of a dock-worker strike in California during the month. The majority of U.S. imports enters the country through California ports. Though the threat of a strike remains, the likelihood has diminished in recent weeks.

Still, the steadily widening deficit is enough to rattle confidence in the economic recovery, some economists said.

"The trade deficit coming in a bit wider suggests growth is going to be a lot slower. It throws more support on the notion that there is more uncertainty in the short run," Chan said. "But that's premature speculation."

News of the widening trade gap comes amid revised estimates from the Bush administration that the federal budget deficit would come in closer to $165 billion than the $106 billion it previously forecast.

The Bush White House blames the growing deficit on the slowing economy, costs associated with the Sept. 11 terrorist attacks and the resulting war on terrorism. However, Democrats argue that the administration's $1.3 trillion tax cut also helped wipe out the budget surplus from a year ago.

Meanwhile, inflation, as measured by the Consumer Price Index, has remained in check, giving economists just enough optimism not to throw in the towel.

While the CPI rose just 0.1 percent in May after remaining flat in April, the so-called "core CPI," which excludes often-volatile food and energy prices, rose 0.1 percent in June after rising 0.2 percent in May. Economists expected core CPI to rise 0.2 percent, according to Briefing.com.

"It was a good report right through. As you look through the report there is a noticeable absence of inflation on a broad basis," said Stuart Hoffman, chief economist at PNC Financial Services Group and PNC Advisors. "The numbers, if anything, are steady to lower on inflation and show that it just isn't at all a problem for the economy or the Fed."

U.S. Treasurys rose following both reports, while stocks headed lower in early trading Friday.

Economists and policy makers have been relatively unconcerned about inflation for some time, particularly with the economy still struggling to recover from a recession that began in March 2001.

The low risk of inflation, combined with uncertainty about the strength of business spending this year, should keep the Federal Reserve from rushing to raise interest rates anytime soon. The Fed cuts rates to lower the cost of borrowing and stimulate the economy, and it raises rates to fight inflation.

Fed Chairman Alan Greenspan has said the Fed's current target for short-term interest rates is highly accommodative -- like flooring the gas on the economy -- and will have to be reined in eventually to keep the economy from running away. But many economists now doubt the Fed will make such a move this year.

"The CPI report was very tame. It sort of reflects the comments by Alan Greenspan that even though monetary policy is way too expansive right now, inflation is sufficiently a non-event, a non-problem, so the Fed obviously can wait at this point," said Anthony Chan, chief economist at Banc One Investment Advisors.