The U.S. economic data was all fairly positive this morning, with lower than expected inflation, but stronger manufacturing and homebuilding.

The U.S. Labor Department is reporting that consumer prices fell for the first time in seven months in November. The CPI dropped 0.2%, after holding steady in October.

The “core” index, which excludes food and energy prices, declined for the first time in 21 years. Economists had expected the overall index to remain unchanged, and for the core index to climb 0.1%.

“This morning’s unexpectedly weak U.S. consumer price index report for November underscored the almost total absence of inflationary pressures in the U.S. economy and lent more credence to the view that the U.S. economy can sustain above-potential growth for several more quarters before price pressures start to build,” says TD Bank.

“Today’s data are consistent with the view Fed officials have been articulating in recent statements that, while the threat of disinflation may have abated in the United States, the risks of inflation are equally remote”.

BMO Nesbitt Burns says that an uptick in CPI inflation next year remains a good bet. “Armed with the weaker U.S. dollar, commodity prices heading north, and a strengthening economy, rising inflation pressure is still likely to emerge as a concern for the Fed. But not yet. Not yet.”

In a separate release, the U.S. Commerce Department says the housing sector shows no signs of slowing. Housing starts rose 4.5% to 2.070 million annual rate in November. The last time home-building activity past the 2 million mark was in February 1984. Starts rose a revised 2.5% in October to a 1.980 million rate. Economists had expected a 3.1% drop

“Still-low mortgage rates are keeping the U.S. housing juggernaut on a robust trend. This will help support solid Q4 residential investment growth and provides further evidence that the U.S. economy is firmly on a recovery path,” BMO Nesbitt says.

U.S. industrial production also trumped expectations in November, rising by 0.9%, the largest monthly jump since October 1999. Even better, Nesbitt says, the gains were broadly-based.

Capacity utilization rose by 0.6 percentage points to 75.7% last month, adding to a general uptrend that started in June.

“The industrial production report was great news, particularly after the low CPI report earlier today. The U.S. is in a broadly based economic sweet spot,” BMO Nesbitt says.

The Commerce Department is also reporting that the U.S. trade gap narrowed to $135 billion in the third quarter, from $139.4 billion in the second quarter. Economists had expected a shortfall of $136.2 billion.