There is not much in the way of economic news out today, just a few more scattered signs of recovery.

The Chicago Fed national activity index, a weighted average of 85 monthly indicators of U.S. economic activity, rose in February to +.04 from -0.33 in January. RBC Financial Group economists report that the CFNAI is constructed to have an average value of zero.

“Since economic activity tends toward trend growth over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. That the index level is now in positive territory is indicative of a broadening economic recovery that will soon necessitate a new monetary policy environment in the United States and Canada that is consistent with trend growth.”

U.S. new home sales rose 5.3% in February to 875,000. “Consumers have proved remarkably resilient throughout this downturn on both sides of the border. A clear reflection of this trend has been the robustness of the housing market,” says RBC.

“While activity in the housing market is expected to remain strong in the near-term, the market should start to soften up as we progress through the year and rising interest start to take a bite out of affordability. But, with demand for everything from washers and dryers to cars running well ahead of production (witness steeply falling inventory levels), sales can flatten out for a while without jeopardizing the recovery.”

RBC reiterates its expectation that the Fed and the Bank of Canada will raise rates in June by 25 basis points and keep raising rates by increments of 25 basis points at each of their four respective policy meetings thereafter in 2002.