Pending Home Sales Post Small Gain in September

U.S. services sector activity dipped to a six-month low in October, pointing to some moderation in economic growth early in the fourth quarter.

Another report on Monday showed contracts to buy previously owned homes rebounded less than expected in September, an indication that the housing recovery remains gradual.

Financial data firm Markit said its preliminary or "flash" services sector Purchasing Managers Index slipped to 57.3 last month, the lowest reading since April, from 58.9 in September. A reading above 50 signals expansion in the vast services sector.

The index, was dragged down by a decline in the new business sub-index, which touched its lowest level in three months.

"The October readings indicate that the pace of economic growth looks set to moderate in the fourth quarter, down to perhaps 2.5 percent," said Chris Williamson, chief economist at Markit in London.

The U.S. government is expected to report on Thursday that the economy expanded at a 3.0 percent annual pace in the third quarter, according to a Reuters survey of economists.

"We should not lose sight of the fact that the pace of growth nevertheless remains robust, having merely eased from very strong rates in prior months," Williamson said.

In a separate report, the National Association of Realtors said its Pending Home Sales Index, based on contracts signed in September, rose 0.3 percent after falling 1.0 percent in August.

These contracts become sales after a month or two. The gain last month was below Wall Street's consensus forecast of a 0.5 percent rise. Contracts were up 1.0 percent compared to September last year.

"It's hard to tell whether sales are genuinely improving at a slow pace, or whether they are just moving sideways," said Guy Berger, an economist at RBS in Stamford, Connecticut.

"Still, the fall in mortgage rates over the past month and ongoing labor market improvement should provide a tailwind going forward."

The 30-year fixed mortgage rate fell last week to its lowest level since June of last year.

Mortgage rates have declined in tandem with a sharp fall in U.S. Treasury debt yields as slowing global growth and a sharp sell-off in international stock markets prompted traders to push back expectations for an interest rate increase by the Federal Reserve.

(Reporting by Lucia Mutikani and Caroline Valetkevitch; Editing by Paul Simao)