Pending sales of previously owned US homes hit a four-month high in August, a sign the housing market was stabilising at very low levels after falling sharply after a home-buyer tax credit expired. Another report on Monday showed new orders received by US factories fell 0.5 percent in August. But they were up 0.9 percent excluding volatile transportation bookings.
"We don't think things are going to get any worse, but they are not going to get better very quickly," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.
The data offered few fresh clues on whether the Federal Reserve would embark on a new round of monetary policy easing. Financial markets are bracing for the Fed to kick off another round of bond buying as early as next month. The US central bank's decision will hinge on inflation and labour market developments, and a government report on employment on Friday could play a big role.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in August, increased 4.3 percent from July. Markets had expected the index, which leads existing home sales by a month or two, to rise 3 percent. Home sales and building activity are stabilising after a downward spiral following the end in April of a popular tax credit for home buyers. The rise in pending home contracts suggested a modest gain in September existing home sales. However, high unemployment and a glut of homes on the market indicate recovery will be very weak.
"The fact that mortgage applications for home purchase have remained close to a fourteen-year low suggests that the recovery will be both weak and slow," said Paul Dales, a US economist at Capital Economics in Toronto. The central bank last month said it was ready to inject more money into the economy if needed to shore up a sluggish recovery from the worst downturn since the 1930s and prevent a damaging bout of deflation.
The Fed, which has already injected $1.7 trillion into the economy by purchasing mortgage-related and government bonds, next meets on November 2-3. Although housing was the main trigger of the recession, economists said it was not critical for the broader economic recovery and they did not expect it to weigh heavily on the US central bank's policy decision.
The government's report on jobs on Friday is expected to show overall nonfarm employment holding steady in September after declining by 54,000 the prior month, according to a Reuters survey. However, private payrolls probably rose 75,000 after increasing 67,000 in August.
While that would mark an improvement, it would still be well shy of the roughly 125,000 jobs a month or so that economists say are needed to keep up with growth in the labour force and keep the unemployment rate from rising. Although businesses have been lukewarm to hiring workers, they are stepping up spending on capital goods. A key measure of business spending in the factory orders report rose 5.1 percent in August, almost reversing a 5.3 percent decline in July. Orders for machinery rose 5.2 percent, while orders for computers and electronic products gained 3.7 percent.
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