A big drop in Canada's inflation rate for March, even bigger than expected.  The Y/Y Consumer Price Index fell to 1.9% last month, down from 2.6% in February.  Analysts had forecast 2%.  Annual core inflation also stands at 1.9% for March, down from 2.3% in February.  The decline is broadly based, with 6 out of 8 components - particularly food and fuel - posting slower Y/Y increases.

Canada's leading indicators rose at a slower rate in March - 0.4% - following a 0.7% increase in February.  It's the 9th consecutive monthly increase with 8 of 10 components advancing.

U.S. leading indicators climbed 0.3% in March. The figures from the private think-tank, The Conference Board, show 7 of the 10 indicators in the leading index contributed to the increase, led by interest rate spreads, building permits and stock prices.

Existing home sales in The States fell 2.6% in March, the second consecutive monthly decline. However, they are up more than 5% compared to March of last year. The latest figures from the National Association of Realtors send a mixed message as the supply of homes tightened and prices edged upward. 

One note from Canada: 

The number of people collecting Employment Insurance declined 1.2% in February, to just over 552,000. The number of people applying or re-applying for E-I also declined in February, falling 2.5% to 236,000.

It’s all about the Bank of Canada today. The latest Monetary Policy Report is out and it offers a generally more positive outlook.

The Bank projects the Canadian economy will grow by 2.4% in 2012 and 2013, then moderate to 2.2% for 2014. The economy is expected to return to full capacity in the first half of next year. Total and core inflation are expected to be around 2% for the rest of the forecast period.

The Bank notes three upside risks to inflation: higher than expected oil prices; a stronger than expected U.S. recovery; and stronger momentum in Canadian household spending. 

The two downside risks to inflation centre on a resurgence of sovereign debt troubles in Europe and weaker than expected household spending. 

The Bank is projecting that private domestic demand will be, pretty much, the sole economic driver in Canada for the term of the outlook, as households continue to pile on debt.   Canada’s high household debt to income ratio remains the Bank’s number-1 domestic economic concern.

As expected the Bank of Canada is standing pat, holding its benchmark overnight rate at 1%. It has also fired renewed speculation about when that rate will start to climb. Along with today’s announcement the central bank also said “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2-per-cent inflation target over the medium term." The Bank appears to be looking forward to economic conditions during the first half of 2013. That has some analysts predicting the bank rate will start to creep up late this year.

Overshadowed by the Bank of Canada news are the Canadian Manufacturing Sales numbers which – as expected – slipped 0.3% for February. The auto-sector was the main drag but 11 of 21 industries showed declines. This follows a larger than expected 1.3% drop in January.

In the U.S. industrial production was flat for March but managed a 5.4% annual increase in Q1. Manufacturing output declined 0.2% while registering a broadly-based 10.4% increase for the quarter, led by very strong growth in the auto sector.

February housing starts in the U.S. dropped 1.1%, but building permits, for future construction, surged 5.1% indicating steady improvement in the housing market.   Y/Y February housing starts were up 34.7%. Home builder sentiment is running at a 5-year high in the U.S.