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The U.S. trade deficit was probably little changed in July as imports and exports both grew, signaling a revival of commerce as the global slump eased, economists said before reports this week.

The gap between imports and exports increased 1.5 percent to $27.4 billion from $27 billion the prior month, according to the median of 63 estimates in a Bloomberg News survey ahead of the Commerce Department’s Sept. 10 report. Labor Department data released the next day may show the cost of imports rose in August for the fifth time in six months on higher fuel prices.

Rising demand for U.S.-made goods from trading partners such as China, Mexico and the European Union is combining with domestic stimulus measures to help to pull the economy out of a recession. Finance chiefs from the Group of 20 nations meeting in London last week vowed to sustain efforts to boost the global economy.

“Importers and exporters alike had the wind taken out of their sails last year and are only just now starting to pick up the breeze of recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. In New York.

The U.S. trade gap may have widened again last month as the “cash-for-clunkers” program sparked a surge in purchases of vehicles made overseas. Rising oil prices probably also added to the cost of imports. With economists predicting the U.S. economy will grow at an average 2.1 percent rate in the second half of this year, imports will probably climb further.

The $26 billion trade deficit in May was the smallest since November 1999.

Import Prices

Import prices probably rose 1 percent in August from the prior month, led by oil and other commodities, economists surveyed by Bloomberg forecast a Labor Department will report on Sept. 11. From a year earlier, import prices probably fell 16 percent, according to the survey.

With demand picking up, crude oil on the New York Mercantile Exchange averaged $71.14 a barrel in August, up from $64.29 in July and an average $69.70 in June.

Alcoa Inc., the largest U.S. aluminum producer, is among companies profiting from rising demand for commodities. Alcoa last week raised its 2009 forecast for global aluminum consumption because of demand triggered by China’s 4 trillion yuan ($590 billion) in stimulus spending cash advance america.

Chief Executive Officer Klaus Kleinfeld said he expects China’s consumption of the metal to rise 4 percent this year, compared with an earlier prediction of zero growth.

China ‘Back’

“China is back,” Kleinfeld said in an interview. “They had a lot of shovel-ready projects” planned for 2011 that are being started now in response to the global economic slowdown. “Also, the perceived deficiencies in the social network have been improved with the stimulus program, and that directly leads to people looking to upgrade from motorcycles to cars.” shocks.”

The Paris-based Organization for Economic Cooperation and Development cut its estimate for contraction this year in the world’s leading industrialized countries to 3.7 percent from 4.1 percent, while predicting a “modest” return to growth.

U.K. Prime Minister Gordon Brown yesterday warned against a premature end of emergency spending and rescue programs aimed at pulling the global economy out of its worst slump since the Great Depression.

“It would be an error of historic proportions if we were to repeat the errors of the 1930s,” Brown told Group of 20 finance ministers at the opening of their meeting in London. “The risks still very much remain. To start now reversing the extraordinary measures would be a serious mistake.”

Consumer Confidence

Economists say a gauge of U.S. consumer sentiment is likely to show an increase on prospects for renewed growth. The Reuters/University of Michigan preliminary survey of consumer confidence for this month, to be released on Sept. 11, will rise to 67.5 from 65.7 at the end of August, according to the Bloomberg survey.

U.S. stocks have surged since March on signs the recession is easing. The Standard and Poor’s 500 Index has gained 50 percent from a 12-year low reached on March 9, and the Dow Jones Industrial Average has gained 44 percent. The S&P 500 closed at 1,016.40 Sept. 4 in New York; the Dow closed at 9,441.27

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Group of 20 finance ministers agreed to maintain economic stimulus measures after U.K. Prime Minister Gordon Brown warned against a premature end of emergency spending and rescue programs.

“It would be an error of historic proportions if we were to repeat the errors of the 1930s,” Brown told finance ministers at the opening of a meeting in London today. “The risks still very much remain. To start now reversing the extraordinary measures would be a serious mistake.”

Ministers agreed to continue emergency aid to their economies as they plan exit strategies for withdrawing it, according to a German official, who spoke on condition of anonymity because the talks aren’t complete.

The policy makers arrived in the U.K. as a report in the U.S. signaled recovery will be sluggish. Unemployment reached a 26-year high in August even as the pace of job losses slowed. Such mixed signals are preventing them from declaring victory over the recession and peeling back record-low interest rates as well as $2 trillion in fiscal stimulus.

U.K. Chancellor of the Exchequer Alistair Darling and German Finance Minister Peer Steinbrueck were among the officials who began talks in London yesterday, saying it was too soon to unwind measures that Brown estimated were worth $5 trillion. They promised to start outlining how they will eventually do so.

Timing

“The time to start implementing an exit strategy is when you have seen the job through,” Darling said in an interview yesterday. “One of the biggest risks is saying the job is done, now we can throttle back. We have made those mistakes before.”

The International Monetary Fund raised its forecast for global growth next year to 2.9 percent from the 2.5 percent it predicted in July, a G-20 government official said. The Washington-based lender also reduced its projection for the global contraction this year to 1.3 percent, from a 1.4 percent drop, the official said on condition of anonymity, citing a paper prepared for the G-20.

Still, officials should start discussing how to remove the “enormous liquidity” in financial markets before it spurs inflation and government borrowing costs, Steinbrueck said auto loans.

“It’s necessary to prepare for a situation when the economic and financial crisis hopefully will be overcome,” Steinbrueck told reporters. “One can’t talk about the concrete point in time just yet.”

Crisis policies will have to stay in place for another six months, Russian Finance Minister Alexei Kudrin said in an interview in London yesterday.

Coordinating Plans

Countries should ultimately coordinate steps when the time comes to withdraw stimulus, French Finance Minister Christine Lagarde said. Failure to unite would risk fanning inflation, leading to uneven debt burdens and may distort markets.

“It should be done together,” Lagarde said. “What the timing will be for each country will depend on the fabrics of the economy, on the status of where it is, on its size. We must have this coordination amongst ourselves.”

Central bankers are also planning for the exit — without rushing toward it. European Central Bank President Jean-Claude Trichet yesterday used a speech in Frankfurt to outline how the ECB’s stimulus measures will eventually be taken back. Many of its loans to banks will “naturally unwind” as they mature and demand for additional cash wanes, he said.

‘Premature’

“Notwithstanding some recent signs of improvement in the economic outlook, it is premature to declare the financial crisis over,” Trichet said. “Stressing the importance of the exit strategy should not be confused with its implementation.”

The G-20’s policy makers are meeting through today to shape an agenda for a Pittsburgh summit of their leaders in three weeks. They will release a statement about 4 p.m. in London.

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

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The pace of U.S. job losses slowed in August while the unemployment rate reached a 26-year high, signaling the recovery from recession will be slow to develop.

Employers cut payrolls by 216,000, fewer than forecast, after a 276,000 drop in July, Labor Department data showed today in Washington. The jobless rate rose to 9.7 percent; the so- called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — reached a record 16.8 percent.

Today’s figures stoke concern that the recovery forecast to take hold in the second half of the year won’t prompt a turnaround in the job market until 2010. With the ranks of long- term unemployed nearing 5 million, workers are at risk of losing skills, making it even tougher for them to eventually find work.

“The economy is no longer detonating, but we are still losing jobs,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Radio. “It’s going to be a very tough environment for the consumer.”

Stocks fluctuated after the release, and the Standard & Poor’s 500 Index was up 0.3 percent at 1,005.99 as of 11:23 a.m. in New York. Treasuries were lower, with benchmark 10-year notes yielding 3.38 percent from 3.35 percent late yesterday.

Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment this week that it’s “too early” to start exiting from the unprecedented stimulus measures aimed at stabilizing the economy.

Lowering Costs

AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.

“The labor market lags behind the rest of the economy, so we are first going to have to see positive GDP growth,” Christina Romer, chairman of the White House Council of Economic Advisers, said in a Bloomberg Radio interview. While 9.7 percent unemployment is “a tragedy,” Romer noted that the pace of job losses has slowed from 741,000 in January.

Romer said the Obama administration’s $787 billion fiscal stimulus is working to boost growth and declined to comment on whether a second effort will be needed.

Revisions subtracted 49,000 from payroll figures previously reported for July and June. The drop for July is now calculated at 276,000, compared with the 247,000 previously reported.

Payrolls were forecast to fall 230,000 in August according to the median of 79 economists surveyed by Bloomberg News. The jobless rate was projected to rise to 9.5 percent. Analysts in a monthly Bloomberg survey projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent next year.

Recession’s Toll

The latest numbers brought total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.

Among the 14.9 million unemployed Americans in August, 4.99 million were out of work for more than 26 weeks. The percentage of jobless who weren’t classified as on temporary layoff rose to 53.9 percent, up from 39.1 percent a year ago business cards.

“Layoffs that we’re having are more structural and not cyclical, and that makes it more difficult to have a meaningful rebound in income growth, which is a key ingredient as I said for sustainable self re-enforcing expansion,” said Tony Crescenzi, a market strategist and portfolio manager at Pacific Investment Management Co., manager of the world’s biggest bond fund.

Breadth of Declines

All major job categories recorded losses in August, with construction payrolls tumbling 65,000, factories cutting another 63,000 and retailers firing 10,000 people.

Whirlpool, the world’s largest appliance maker, is among those firms still eliminating positions. The Benton Harbor, Michigan-based company said Aug. 28 it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs.

Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave.

Federal Reserve officials had “particular” concern about the job market when they met Aug. 11-12, minutes of the gathering showed this week.

“Long-term unemployment and permanent separations continued to rise, suggesting possible problems of skill loss and a need for labor reallocation that could slow recovery in employment begins to expand,” the Fed said in the minutes released Sept. 2.

Fed Rate Changes

Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.

Chairman Ben S. Bernanke, credited with preventing a second depression in winning nomination by President Barack Obama for a second term last month, has overseen a $1.2 trillion expansion of the central bank’s balance sheet to combat the credit crisis.

Today’s report also showed the average work week held at 33.1 hours in August. Average weekly hours worked by production workers remained unchanged from the month before, at 39.8 hours, while overtime also held at 2.9 hours. That brought the average weekly earnings up to $617.32 from $615.33.

“We’re still going to see some months of job cuts,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “There is a whole range of options, like adding shifts or hours, that companies can put in place until it becomes necessary to hire people back.”

Workers’ average hourly wages rose 6 cents, or 0.3 percent, to $18.65 from the prior month. Hourly earnings were 2.6 percent higher than August 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.2 percent gain for the 12-month period.

The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year.

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European Central Bank President Jean-Claude Trichet said the euro region’s recovery from recession will be “bumpy” and signaled officials are in no rush to withdraw emergency stimulus measures.

While latest data suggest “the significant contraction in economic activity has come to an end,” the recovery “is expected to be rather uneven,” Trichet said at a press conference in Frankfurt today after the ECB kept its benchmark interest rate at a record low of 1 percent. “It isn’t time to exit” policies designed to boost growth, he said.

The ECB is wary of nipping the euro-region recovery in the bud by tightening policy too soon as rising unemployment and the expiry of government rescue packages may damp expansion next year. The bank today raised its forecast for economic growth. At the same time, Trichet said the ECB won’t increase the rate it charges banks on 12-month funds at its next tender, which should “promote the extension of credit to the euro-area economy and, therefore, further underpin its recovery.”

“The key message from today’s decision is that rates are on hold for an extended period, and that the ECB is in no hurry to remove the monetary stimulus that it has put in place,” said Colin Ellis, an economist at Daiwa Securities SMBC in London. “Trichet sought to play down any prospect of a swift economic recovery.”

The euro fell almost a cent after Trichet’s comments to $1.4245.

‘Bumpy Road’

In the U.S., the Federal Reserve signaled in minutes published yesterday that it’s already trying to prepare investors for an end to some of its asset purchases.

Trichet will discuss exit strategies and prospects for the global economy when he meets with officials from the Group of 20 nations in London from tomorrow.

“Uncertainty is very high,” Trichet said. “It’s a bumpy road we have ahead of us. Prudence and caution are still of the essence.”

The ECB today raised its economic forecasts for the 16- nation euro region to predict growth of about 0.2 in 2010 instead of a 0.3 percent contraction. In 2009, the economy will shrink about 4.1 percent, less than the 4.6 percent contraction predicted three months ago.

The ECB expects inflation to average 0.4 percent this year and 1.2 percent in 2010, up from 0.3 percent and 1 percent forecast in June. That is still below the bank’s goal of keeping annual price gains just below 2 percent.

‘Subdued’ Inflation

Euro-region consumer prices have posted annual declines for three straight months. Trichet said while “inflation rates are projected to return to positive territory again within the coming months,” price developments will “remain subdued” amid “ongoing sluggish demand.”

With a global recovery bolstering demand for European exports, economists nevertheless predict the economy will expand this quarter. European economic confidence increased twice as much as economists forecast in August, and the region’s manufacturing and service industries almost ceased contracting.

L’Oreal SA, the world’s largest cosmetics maker, said on Aug. 27 that sales improved in July and will keep recuperating gradually in the second half of the year. Voestalpine AG, Austria’s biggest steel company, said on Aug. 28 it’s ending shortened working hours for staff at its Linz plant after demand for flat steel rebounded “significantly.”

“The green shoots have to be seen in a relative context,” ECB Executive Board member Juergen Stark told a conference in Frankfurt today. “Still, there are signs that we’re moving past the low point. The free-fall of economic activity seems to be stopped and for 2010 we can expect a gradual recovery.”

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Companies eliminated more jobs than forecast in August, a private survey indicated today, signaling that employers have yet to gain confidence about a recovery from the deepest recession since the 1930s.

The 298,000 drop followed a revised 360,000 decline the prior month that was smaller than previously estimated, according to figures from ADP Employer Services.

Today’s figures underscore the danger that consumer spending, which accounts for 70 percent of the economy, may be slow to gain traction in coming months. The report comes two days before a Labor Department release forecast to show the U.S. unemployment rate rose to 9.5 percent in August.

“Considering the severity of the recession and uncertainty over the strength and sustainability of the recovery, the labor market’s recuperation will be slow and painful,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, which forecast a drop of 290,000.

Stock-index futures dropped and Treasuries erased losses after the ADP report. Contracts on the Standard & Poor’s 500 Index lost 0.4 percent to 992.90 at 8:49 a.m. in New York. Yields on benchmark 10-year notes were little changed at 3.36 percent.

Labor Productivity

Meanwhile, U.S. worker productivity rose in the second quarter at the fastest pace in almost six years as companies squeezed more out of remaining staff to boost profits. Productivity, a measure of employee output per hour, rose at a 6.6 percent annual rate, the most since the third quarter of 2003, revised figures from the Labor Department showed today in Washington. Labor costs fell by the most in nine years.

The Labor Department’s payrolls report, due in two days, may show employers cut another 225,000 jobs in August and unemployment climbed from 9.4 percent in July, according to the median forecast in a Bloomberg News survey.

The economy already has lost 6.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.

The ADP report was forecast to show a decline of 250,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey. Projections ranged from decreases of 396,000 to 160,000.

Challenger Report

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

Employers announced 14 percent fewer job cuts in August than the year-earlier month, and 21 percent fewer on a month- to-month basis, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc.

Today’s ADP report showed a decrease of 152,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 146,000 workers.

Employment in construction fell by 73,000, while financial firms trimmed jobs by 19,000, ADP said, the 21st consecutive monthly drop for the industry.

Companies employing more than 499 workers shrank their workforce by 60,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 116,000 jobs and small companies decreased payrolls by 122,000, ADP said.

Announcements of staff reductions continued last week. Whirlpool Corp., the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.

Meanwhile, General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” trade-in program.

The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.

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Factories in the U.S. expanded in August for the first time in 19 months, helping lead the economy out of the worst recession since the 1930s.

The Institute for Supply Management’s factory gauge increased to 52.9, exceeding forecasts and the highest level since June 2007, the Tempe, Arizona-based group said today. Fifty is the dividing line between expansion and contraction. Another report showed more Americans than anticipated signed contracts to buy existing homes in July.

The gains indicate Federal Reserve efforts to thaw credit markets together with the Obama administration’s “cash-for- clunkers” program and tax credits for first-time homebuyers are reviving demand. Factories and builders, which have accounted for half of all the jobs lost since the recession began in December 2007, may keep growing in coming months as sales rise.

“All the pieces are falling into place for a recovery to take hold,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “The stimulus should exaggerate the pace of recovery in the third quarter and then it’ll settle back down a little bit.”

Economists forecast the index would rise to 50.5 from July’s 48.9 reading, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from 49 to 53.5. Manufacturing accounts for about 12 percent of the world’s largest economy.

Pending Sales

Pending sales of previously owned homes climbed 3.2 percent in July, exceeding the 1.5 percent median forecast of economists surveyed by Bloomberg, a report from the National Association of Realtors also showed. The sixth consecutive increase marked the longest stretch of gains since records began in 2001.

Other reports today showed manufacturing was gaining speed worldwide. China’s factories expanded in August at the fastest pace in 16 months, while European industry shrunk by the least in more than a year.

The ISM’s production index jumped to 61.9, the highest level since October 2005, from 57.9 the prior month.

The group’s new orders measures increased to 64.9, the highest level since December 2004, from 55.3. A gauge of export orders climbed to 55.5 from 50.5.

Employment

The employment index increased to 46.4 from 45.6.

The index of prices paid increased to 65 from 55. Economists had projected that the measure, which averaged 66.5 last year, would rise to 57.8.

The supplier delivery gauge, a measure of the time it takes to receive goods, increased to 57 instant payday loan.1 from 52 the prior month. The measure of orders waiting to be filled rose to 52.5 from 50.

The inventory index increased to 34.4 from 33.5. A figure below 50 means manufacturers are reducing stockpiles.

Industry reports today may show sales of cars and light trucks climbed to a 13.3 million annual pace in August, the most since August 2008, according to economists surveyed by Bloomberg.

Ford Motor Co, General Motors Co. and Honda Motor Co. were among automakers citing the popularity of the federal cash-for- clunkers plan in announcing production increases for the coming months.

Clunkers

The program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The program produced almost 700,000 auto sales before it ended, the Transportation Department said Aug. 26.

Ford, the second-largest U.S. automaker, posted its first monthly U.S. sales gain in July since 2007.

“We had a solid July sales month and we are headed toward an even stronger August,” Ford marketing chief Ken Czubay said last week in a statement.

GM last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production, in part because of “cash for clunkers.”

Smaller stockpiles are also contributing to a rebound in output as orders rise to stock bare shelves. Inventories dropped at a record $159.2 billion annual rate in the second quarter, the Commerce Department said last week. They fell at a $113.9 billion pace in the first three months of the year.

Restock

Intel Corp., the world’s biggest chipmaker, is among companies benefiting as customers increase inventories back to more normal levels. The Santa Clara, California-based company last week increased its sales forecast for this quarter.

Intel joined computer-industry companies including Dell Inc. and Hewlett-Packard Co. in predicting a recovery, and has credited consumers in Asia for a rebound in orders for personal computers.

U.S. exports in May and June showed the biggest two-month gain in almost a year, signaling the worst global recession since World War II was easing.

– With assistance from Connie Guglielmo in San Francisco. Editors: Carlos Torres, Christopher Wellisz

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