UPDATE 1-U.S. government posts $125 bln deficit in May

WASHINGTON, June 12 (Reuters) - The U.S. government posted a budget deficit of $125 billion in May, more than twice the level registered in the same month last year.

The budget has become a key point of political contention in Washington during this election year. Economists worry another budget impasse like the one that cost the United States its AAA credit rating last year could be in store at the end of 2012, potentially derailing a fragile economic recovery.

The May deficit, which was close to analyst forecasts, followed a rare month of surplus in April that was due to higher budget receipts during tax season but also other temporary factors.

So far this fiscal year, the budget deficit stands at $844.5 billion, narrower than at the same time a year ago.

Under the government's accounting system, October is the opening month of fiscal 2012. During fiscal 2011 which ended Sept. 30, the budget deficit totaled $1.296 trillion.