Canada’s composite leading indicator rose 0.3% in February, improving on gains of 0.2% in the last two months.

RBC says that the gains are being driven by ongoing strength in the housing market. Of the 10 sub-components, five were up, three were down and two were unchanged, RBC says. “The biggest increase came from the housing index, up 6.7% on January’s surge in housing starts,” points out RBC. Other components rising were the S&P/TSX stock price index, employment in business and personal services, the U.S. leading indicator and sales of furniture and appliances.

“The data underscores the story behind Canada’s G7-leading economic performance during the past two years that growth has come from a diverse range of sources,” RBC finds. “Recently, the housing market has been driving growth, evidenced not only by strong construction figures but also by booming sales of household durable goods. The housing sector is expected to slow during the course of this year, but the U.S. economy should have stabilized by the second half of 2003. As a result, Canada’s manufacturing and export sectors should be making more of a contribution to growth.”

The market isn’t paying much attention to this news, with its focus dominated by the impending war with Iraq. “Within this context, data will take somewhat of a back seat, although Tuesday’s Fed meeting will be prominent,” notes RBC.

It says that it expects another Fed interest rate cut of 25 basis points. “The news of February’s 1.6% drop in retail sales and the wipeout of 308,000 jobs, released in the past two weeks, will tip the Fed into action,” it says.