Pending homes sales rise but factory orders fall

Orders for U.S. capital goods rebounded in August and pending sales of existing homes climbed for a second month, showing the recovery is stabilizing after a second-quarter slowdown.

Pending sales of previously owned U.S. homes hit a four-month high in August, a sign the housing market was stabilizing at very low levels following its sharp drop after a home-buyer tax credit expired.

Another report Monday showed new orders received by U.S. factories fell 0.5 percent in August, although 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, Mass.

The data offered few fresh clues on whether the Federal Reserve would embark on a new round of monetary policy easing. Last month the central bank 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.

The Fed, which has already injected $1.7 trillion into the economy by purchasing mortgage-related and government bonds, next meets on Nov. 2-3.

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.

Meanwhile, the increase in capital goods orders excluding defense and aircraft exceeded the 4.1 percent gain the Commerce Department estimated in last month's report.

Monday's figures on total orders to factories showed a drop of 0.5 percent, depressed by a pullback in demand for aircraft, which is often volatile. The government revised July figures to show a 0.5 percent increase in orders, up from a previous estimate of 0.1 percent.

Orders for machinery, computers and communications gear all improved in August, the report showed.

"The trend in business investment is still quite solid," said James O'Sullivan, global chief economist at MF Global Ltd. in New York. "Business investment is still one of the stronger parts of the economy."