Quarterly Economic Forecast - TD Bank, N.A. · Quarterly Economic Forecast International Highlights...

TD Economics

@TD_Economicshttp://economics.td.com

Quarterly Economic Forecast

International Highlights • Persistentabove-trendgrowthinG7economieshasledustoreviseupouroutlookforglobalgrowthfor2017,with

momentumfeedinginto2018.Overall,weanticipateglobalgrowthtoaverage3.5%through2019,atouchfirmerthaninourJuneoutlook.

• Economicslackisbeingabsorbedatafasterclip,drivingcentralbankstoremovestimulusandpushinterestrateshigherglobally.

• TheU.S.economyturnedinasolidperformanceoverthefirsthalfoftheyear,averagingjustabove2%annualized.ThatSteady-Eddieperformanceshouldcontinueoverthenexttwoyears,despiteanear-termhitfromHurricanesHarveyandIrma.

• OnemoreFedratehikeremainsonthedocketforthisyear.But,aweakerinflationforecastandincreasedwarinessbytheFedleadsustoexpectfewerratehikesin2018thaninourJuneforecast.

September21,2017

Canadian Highlights• TheCanadianeconomicsizzlehasyettofizzle.Weanticipatecontinuedabove-trendgrowthtoyieldanimpressive

3.1%expansionfor2017,thebestperformancesince2011.Ashigherinterestratesdotheirwork,weexpectgrowthtobeclosertothe2%markin2018,beforesettlingatanear-trendpaceof1.7%in2019.

• Theeconomy’sunanticipatedstrengthspurredtheBankofCanadatohikeitspolicyinterestratetwicesinceourJuneforecast,andfurtherincreasesareexpected,takingtheovernightrateupto1.75%bytheendofnextyear.

• ThecombinationofhigherinterestratesandadiminishedwealtheffectonspendingfromslowerhousingactivityinOntariowillbeinstrumentalinreiningintheconsumerspendingboom.Themoderationinhouseholdspendingisexpectedtobepartlyoffsetbyapickupinbusinessinvestmentandgovernmentspending.

TableofContents

ChaptersGlobalOutlook ..............................................................2U.S.Outlook ..................................................................4CanadianOutlook .........................................................6FinancialOutlook ...........................................................8

Forecast TablesInterestRateOutlook .....................................................9ExchangeRateOutlook .................................................9CommodityPriceOutlook..............................................9CanadianEconomicOutlook ........................................10U.S.EconomicOutlook ................................................ 11GlobalEconomicOutlook ............................................12EconomicIndicators:G-7&Europe ..............................12

We’ve Got To Admit It’s Getting Better

Beata Caranci, Chief Economist|416-982-8067

Derek Burleton, Deputy Chief Economist|416-982-2514

James Marple, Senior Economist|416-982-2557

Fotios Raptis, Senior Economist |416-982-2556

Leslie Preston, Senior Economist|416-983-7053

Brian DePratto, Senior Economist|416-944-5069

James Orlando, Senior Economist|416-413-3180

ContributingAuthors

http://economics.td.com

2


Global Outlook: Serial Disappointment, No MoreAbroadening and strengthening of expansions in ad-vancedandemergingeconomieshashelpedrestoreasenseofoptimismintheglobaleconomythathasbeenmissingforseveralyears.Globalgrowthinthefirsthalfof 2017 averaged 3.5%, marking the best start since2014.Moreover,thecompositionofgrowthgloballyhasshiftedtowardamoreself-sustainingdynamicofrisingdomesticdemandaccompaniedbyanuptick inglobaltrade.Thisimprovedeconomicmomentum,whichisbe-ing supportedbyaccommodativemonetaryandfiscalpolicies,hasledustoboostourforecastforglobaleco-nomicgrowthfromourJuneoutlook.Globaleconomicactivityisnowexpectedtoriseata3.5%pacethisyear(+0.2percentagepointsfromJune),followedbyaslight-lyabove-trendpaceof3.6%in2018.

This stronger economic activity can go a longway tocounteringthedragfromstructuralheadwindsandel-evated geopolitical uncertainty. Persistent outperfor-mancebyG7economies iseliminatingexcesscapacityfasterthananticipated,resultingintighterlabormarkets(Chart 1). Althoughwages have yet to reflect any sig-nificantupwardpressure, itshouldbeonlyamatteroftimewithinthismaturephaseoftheeconomiccycle.Asfirmsbegintocompeteforscarcerskilledlabor,wean-ticipatewages tomovehigher,pinchingprofitmarginsandeventually leading toamoredurablemoveup inconsumerprices.

Better thanexpectedgrowth is alsopromptingcentralbankstoshifttoamorehawkishtoneoninterestrates.Forinstance,theBankofCanadaandtheBankofEng-landhavealready tipped their hand in conveying thatemergencylevel interestrateshavedonetheir jobandare no longer needed.Moreover,with the current ex-pansiongettingalittlelonginthetooth,thereisasensethatcentralbankswanttoreloadtheirmonetarypolicyarsenal,inordertoreadyforthenextslowdown.

Alltold,abovetrendeconomicgrowthshouldpersistforsome time inmany advanced economies, placing thefocussquarelyonamarchhigherininterestrates.How-ever,thismarchwillneedtooccuratameasuredpaceinordertobalanceagainstongoingdownsideuncertaintystemmingfromBrexit,geopoliticalevents,andthetrendtowardmore inward-looking trade policies. But,make

nomistake,highlyaccommodativemonetarypolicyhasdoneitsjobinsowingtheseedsforself-sustainingeco-nomicgrowthacrossanumberofregions.Assuch,theforthcomingriseininterestratescanbeseenasaposi-tivereactionthatthecurrentexpansionhasalittlemoreroomtorun(Chart2).

The return to self-sustaining growthStrong performances bymany advanced economies inthefirsthalfoftheyearisabigreasonwhyouroutlookfor global growth and interest rates is now firmer thaninJune.However,ourinflationoutlookhasmovedintheoppositedirection,withadowngradelargelyreflectingre-centweaknessandheadwindsfromexchangerateappre-ciation.Thisdichotomycontinuestounderpinmarketdis-cussionsonwhetherthePhillipsCurveisdead.Wehaveextensivelyreviewedthisrelationshipacrosscountriesandfindthat“dead”isanoverstatement.Rather,it’sjustalittlelazy in transmitting capacity and input price pressuresdowntoconsumers,buttherelationshipverymuchholdsacrosscountries.It’sjustamatteroftimebeforeinflationrecordsaconvincingupticktosupportcentralbankactiononmonetarypolicynormalization.

Amongadvancedeconomies,weforeseestrongereco-nomic growth in Canada, the Euro Area, and Japancompared to our June outlook. The improved outlookforCanadalargelyreflectsanincredibleamountofcon-sumerspendingmomentumduetoapotentcombinationofbroad-basedjobstrengthandaninfusionofregionalhousingwealtheffects.Webelievethisinfluencewillper-sistthroughtheautumnandkeepfurtherratehikeswithinscope for theBankofCanada (BoC),whichhasalready

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

U.S. Japan Canada UK Euro Area

CHART 1: LABOR MARKET SLACK TO CONTINUE TO BE ABSORBED

2017 2018 2019

Source: TD Economics

Unemployment rate gap with long-run average (%)


3


respondedinrapidfashionwithtwohikesinsixweeks.

Acrossthepond,sustainedeconomicmomentumintheEuroAreaonceagainsurprisedmanyanalystsinthefirsthalfofthisyear.Strongdomesticdemand,supportedbylow interest ratesandsomefiscal spending,hashelpeddriveasolidrecoverythatlookssettobroadenthroughallregionsandindustries.At2.4%,GDPgrowthinthefirsthalfoftheyearisdoubleestimatesoftrend,implyingthataslowdowntoamoresustainablepaceis intheoffing.Agingpopulations,weak laborproductivitygrowth,andthe slowpaceofadoptionofeconomic reforms shouldtemperthepacebackbelow2%.But,there’snodenyingthateconomicslackhasdisappearedmorequickly thananticipated,andtheECBissettoannounceanendtoitsassetpurchasesatitsupcomingmeetinginOctober.

Somewhat surprising has been the Bank of England’s(BoE)shiftintone,reflectinglessconcernoverthemedi-um-termeconomicdragfromBrexit. Itviewstherecentstablebutbelowtrendeconomicperformanceasconsis-tentwith theneedtowithdrawtheemergencystimulusenactedafterlastyear’sreferendumvote.Lookingahead,webelievethattheBoEislikelytojointheBoCandtheFederalReserveinraisinginterestratesthisyear.

Anewcomertothe“above-trend”clubisJapan,whichhasproducedthreeconsecutivequartersofeconomicgrowthatalmostdoubleitstrendpace.Robustdomesticdemandhasbeendrivenbyacombinationofprivateconsumptionand infrastructure investments, a reflectionof thepass-throughoffiscalstimulusannouncedlastyear,aswellaspreparations for the 2020 Tokyo summerOlympics. Al-thoughthesefactorsareexpectedtosupportactivity inthe medium-term, Japan’s value-added tax increase in

October2019 to 10% from8%willposea speedbumpinto2019-2020.

Emerging market growth counters risksAnunexpectedlystrongreboundbycommodityexport-ers, such as Russia, Brazil, andNigeria, and a resilientChina helped lift emerging market growth in the firsthalfofthisyear.Followinganexport-drivensurgeinthefirstquarter,strongerhouseholdandbusinessspendinghelpedtheBrazilianeconomyfinallyescaperecessioninthe secondquarter.Moreover, there are signs that theeconomic recovery is strengthening, leaving politicaluncertaintyasthelastimpedimenttoreturningtoare-newedcycleofsustainableeconomicexpansion.Goingforward, strongerglobal demand should support eco-nomic activitymore broadly across emergingmarkets,withtheweakerU.S.dollarhelpingtoreducerisksasso-ciatedwithelevatedlevelsofforeigncurrencydenomi-nateddebt(Chart3).

China’seconomyexpandedata7.0%annualizedpaceinthesecondquarter,erasinganydoubtswhetheritwillachievethe“about6.5%”targetsetbydomesticauthori-ties.Infact,weanticipatethatChina’seconomywillriseby6.6%in2017,upfromourJuneforecastof6.4%,be-fore slowing gradually to a 6.2% pace in 2019. Effortsbyauthoritiestorein increditgrowthacrossallsectorsappear tobebiting intoactivity,withgrowthexpectedtoslowin17H2.Givenongoingconcernsaboutelevat-edlevelsofChinesedebt,attentionwillshifttothe19thNationalCongressoftheCommunistPartyofChinasetforOctober 18th, for hintsonhowChinese authoritiesplanonresolvingdomesticimbalancesoverthenextfiveyears.

-20-15-10

-505

101520

Forecasts assume credit growth holds at recent 4-qtr average through 2019.Source: Bank for International Settlements and national statistical agencies through 17Q1,forecasts thereafter from TD Economics.

Forecast Cumulative Percentage Point Improvement in Non-Financial,All-Sector Debt-to-GDP Ratios Through 2019 Relative to 2016

CHART 3: STRONGER FOREIGN DEMAND TO HELP EMS GROW OUT OF DEBT CONCERNS

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

I II III IV I II III IV I II III IV

2017 2018 2019

CHART 2: ADVANCED ECONOMY CENTRAL BANKS TO PUSH POLICY RATES HIGHER

U.S.

Canada

UK

Japan

Euro Area

* Deposit rateSource: Domestic central banks. Forecasts by TD Economics

Policy Rate (%) Forecast


4


U.S. Outlook - Weathering The StormsTheU.S.economy turned ina solidperformanceoverthefirsthalfoftheyear,averagingjustabove2%annual-ized.Thatwasasexpected,withtheconsumerperform-ing strongly andbusiness investment posting thebestback-to-backquarterssince2014.Slightlylessexpectedwas the considerablemomentum that carried into thethird quarter. Growth was tracking roughly 3% annu-alized prior to the devastation caused by HurricanesHarveyandIrma.Theimpactofthesestormswillbeasetback inQ3, but there is a good cushion to absorbthe downdraft, and subsequent quarterswill givewaytoastrongrebound.Fortheyearasawhole,weexpectGDP to record a 2.1%pace, onparwith our previousforecastinJune.Lookingbeyondthedatavolatility,ourmedium-termoutlook for growth remains broadly thesame(Chart4).

Over the next two years the economy is expected tocontinue its “Steady-Eddie” performance, with growthedgingabove2%.Thatperformance is shapedby ro-bustconsumerspending,solidinvestmentandrenewedstrengthinhousing(Chart5).Asareminder,thesefig-uresdonotbuildinanyanticipatedfiscalimpactsfromtaxpolicy,whichoffersupsidepotentialtoaneconomyalready outpacing its longer-term cruising speed. Thedynamics favor further tightening in the labor mar-ketandgradualupwardpressureon inflation. Inotherwords,don’tcounttheFederalReserveoutyetonfur-therratehikes.

Hurricanes won’t knock economy off course Theone-twopunch fromHurricanesHarveyand Irmaisestimated toknockbackGDPgrowthapproximatelyhalfapercentagepointtojustover2%inQ3.Theim-pactfromHurricaneHarveyisexpectedtobelargerintermsofGDP (0.2-0.4%-pts) than Irma (0.1-0.2%-pts).Thiscapturesthedisruptionofregulareconomicactiv-ityduringthestorms,butitdoesnotcapturethecata-strophiclossofpropertysufferedduetotheHurricane.InTexas,withmajorrefineriesshutdown,theimpactwillbemoreskewedtowardsgoodsexportsandinventories.InFlorida,ontheotherhand,theimpactisexpectedtobefeltmoreseverelyonconsumptionandtourism,withresidentialinvestmentalsotakingahit.

ThereboundinGDPgrowthwillthencapturerebuilding

activity alongsidenewpurchasesmade to replace lostitemslikecars,furniture,clothes,andsoforth.Therefore,weexpectthefourthquartertoreflecttheramp-upineconomic activity, assuming the disruptions from IrmafadebyOctober. Rebuildingwill take time,particularlywithina construction sector that is already facingverytight labormarket conditions.Weexpect theboost toeconomicgrowthtolingerthroughthefirsthalfof2018.

Soft inflation an unsolved mysteryThe lossofmomentum in inflation remainsanareaofdisappointmentinourforecast.TheFed’spreferredinfla-tiongauge–corePCEinflation–haseasedfrom1.9%earlierthisyeartojust1.4%inJune.Someofthestoryis captured by idiosyncratic price changes (i.e. a dropincellphonecontractpricingastheindustrymovestoofferingunlimiteddataplans).However,measuresofun-derlyinginflationthatstripoutsuchone-offmoveshave

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q1 Q2 Q3F Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F

2017 2018 2019

CHART 4: Q3 HIT BY STORMS, BUT OUTLOOK REMAINS SOLID

Sept. 17 forecast

Jun. 17 forecastForecast

Real GDP Growth, %

Source: Bureau of Economic Analysis. Forecast by TD Economics.

-1

0

1

2

3

2016 2017 2018 2019

CHART 5: CONSUMER STILL SOLID FOUNDATION FOR GROWTH

Consumer spending& housing

Businessinvestment

Net exports

GDP

Source: BEA/HAver Analytics, TD Economics.

Contribution to Growth, Percentage Points


5


alsobeenonthesoftside,suggestingthatidiosyncraticorsector-specificfactorsareonlyaboutpartofthestory(Chart6).

Importantly, inflation has deteriorated even amidst atighteninglabormarket.Thisphenomenonisoccurringinotheradvancedeconomiesaswell,suggestingbroad-erglobalfactorsmaybeatworksuchasongoingglobalexcesssupply,theinfluenceofdigitizationonpricetrans-parency,andelevatedcorporateprofitmarginsthatper-mitfirmstoabsorbinitialmovementsinwagecosts.

Whatevertheculprit,itisclearlytakinglongerforinfla-tiontorespondtocapacitypressuresintheeconomy.Asaresultofrecentmisses,wehaveadjustedourinflationforecastlower.Westillexpectpricepressurestopickup,andanuptickinAugust’sCPIdataprovidedsomereas-suranceon that score. But, recentdevelopments haveleft our tracking of inflation asmeasured by the Fed’spreferredcorePCEpriceindex(strippingoutfoodandenergy)underthecentralbank’stargetof2.0%untilthesecondhalfof2019,threequarterslaterthanourprevi-ousforecast.

TheFedhasnotsolved the inflationmysteryeither,asevident by recent speeches by FOMC members thatsuggestgreatercautioninthepaceofratehikesahead.A weaker inflation forecast and increased wariness bytheFedleadsustoexpectfewerratehikesoverthenextyear and a half than our June forecast. However, ourviewcontinuestorunwellaheadofthatofthemarkets,whichremainsoverlycautiousonthisfront.Weexpectthecentralbanktoliftrates25basispointsabouteverysixmonths,takingthefederalfundsrateto2.00%bytheendof2018,25basispointslowerthanourJuneforecast(formoredetailspleaseseetheFinancialOutlook).

Still Waiting on WashingtonMeanwhile,westilldon’tknowthedetailsofanytaxcutor reform legislation,andthisoffersapotential sourceofupsiderisk totheforecast. In thegoodnewscamp,PresidentTrumpmadeadealwithDemocrats inCon-gress that tied $15.25 billion for Hurricane relief to athree-monthextensioningovernmentfundinganddebtceilingsuspension.Thisnotonlyensuresamore rapidexecutionofreliefandrebuildefforts,butalsoremovesapotentialsourceofmarketvolatilityfromSeptember(seereport).TheriskofagovernmentshutdowninDecem-

ber remains,butsuspending thedebtceiling for threemonthswillenableTreasurytoborrowenoughtostaveoffthenextdebtceiling“deadline”untiltheNewYear.

Atahighlevel,CongressandtheWhiteHouseappeartobeunitedastheyswitchgearstotaxreformthisfall.Theleadershiphasagreedonabroadsetofprinciples,butdetailsarestillforthcoming.Thedestination-basedcashflowtax,whichwouldhave includedcontroversialbor-deradjustments,hasbeendroppedfromthehigh-levelplan.Thistaxwouldhaveraisedsignificantrevenuestopay for corporate tax rate reductions, as would haverepealingandreplacingtheACA–acombinedimpactofbetween$1.2and$1.3trillioninfiscalroomovertenyears.Without them, tax reformwill need tobemoremodesttoachieverevenue-neutrality.Byallaccounts,itdoes look likeCongresswillbeproposingacorporatetaxratecutclosertothe25%mark,ratherthanthemoreambitious15-20%goalfromelectioncampaignrhetoric(seereport).

Congress needs to pass a budget resolution in ordertopasstaxreformusingthereconciliationprocess,andavoidafilibusterintheSenate.Sofar,itremainsunclearwhatfiscalpaththatbudgetwouldset.Budgetpropos-alsfromtheHouseandWhiteHousehaveemphasizedsignificant spending restraint, which would impose adragon theeconomy.So thedegreeoffiscalstimulusalsoremainsunclear,keepingourexpectationsinneutralpositionforthebaselineoutlook.Furthermore,thelon-gerittakestofinalizetaxreformplansorredraftNAFTApolicies,thegreatertheriskthatbusinessesdelaycapitalspendingdecisions,potentiallycrimpinggrowthsome-whatoverthenear-term.

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2007 2009 2011 2013 2015 2017

CHART 6: UNDERLYING INFLATION ALSO SOFT

Dallas Fed Trimmed mean

Total PCE

Source: Dallas Fed, Haver Analytics & TD Economics.

PCE Inflation, Year-Over-Year % Change


https://economics.td.com/us-debt-ceiling-and-budgets

https://economics.td.com/reagan-tax-reform

6


Canadian Outlook - Sizzle Has Yet To FizzleThereseemstobenostoppingCanadaoflate.Robustgrowthof3.7%(annualized)inthefirstquarterwasfol-lowedbyaneye-popping4.5%expansionintheApril-June period. What’s more, the higher frequency dataagain point to an economy likely to maintain above-trendgrowthinthesecondhalfoftheyear(Chart7).Ac-cordingly,wehavefurtherbumpedupourGDPgrowthforecast for2017to3.1%(from2.8%previously).GiventheBankofCanada’semphasisondataevolutionanddwindlingeconomicsparecapacity,webelievethecen-tralbankwillcontinuetoremovemonetarystimulus.Thepolicyinterestrateisexpectedtoreachto1.50%byearlynextyear,beforealongerpausetoevaluatetheeffects.

Economies can only grow above their natural running-speedforsolong,andCanadaisnoexception.Growthisexpectedtomoderatetoastill-respectable2.1%in2018anddeceleratetoroughlyitstrendpace,growing1.7%in2019.Gettingfromheretothereisnotguaranteedtobea smoothprocess.Therearemany risks thatcan throwthegrowthtrajectoryofftrack,includingNAFTArenego-tiation,theevolutionofkeyhousingmarkets,andthere-sponseofindebtedCanadianstorisingborrowingcosts.

For the Bank of Canada, actions speak louder than wordsAcompleteU-turnhastakenplaceattheBankofCana-dasincethespring.Aneutral-to-dovishtoneofcommu-nicationaroundtheoutlookformonetarypolicyrapidlygaveway toahawkishbent, resulting inhikesatboththe July and September decisions. The latter increase,which brought the overnight rate to 1.00%, is notableforthesignalitsends:itoccurredatameetingwithnopress conference or updated forecast. This is not ter-riblyunusual,butisabreakfromthepost-crisisexperi-ence,andthecommunicationstyleconveyedbyothercentral banks.Within a six-weekperiodbetweenBankofCanadapolicymeetings,therewerenospeechesorother public communication. It was this element thatresultedinasurprise-factorforfinancialmarketpartici-pants,ratherthanwhethertherate-hikeitselfwasjusti-fied.BondyieldsandtheCanadiandollartookflight.Theonlyquestionnowiswhetherconsumersaregettingthemessage to ease up on spending, which ran at a 5%pacethroughthefirsthalfoftheyear–thelikesofwhichhasnotbeenseensincetheearly2000s.

Inadditiontoagrowinguneaseaboutexcessiveborrow-ing by households, policymakers are signalling concernthatasignificantinflationaryimpulsecouldmakeanap-pearancedowntheroad,inlightoftherecentandrapidabsorptionineconomicslack.Ourresearchsuggeststhatinflationisbeingweigheddownbyanumberofstructuralfactorsthatareunlikelytoabatequickly.What’smore,therecentrun-upoftheCanadiandollarintroducesanothercounterweighttothedemand-pullforcesthatcomefromanabsenceofeconomicslack.Withcoreinflationforecasttomakeonlygradualprogresstowardstothe2%targetinthecomingquarters,theBankofCanadaislikelytomovemoreslowlyinremovingstimulusbeyondQ12018.

Decoding consumption strengthCanadianeconomicgrowthhasnotjustdefiedexpecta-tionsofitsstrength,butalsothesource.Consumersarein thedriver ’s seat (Chart 8), propelledbyhealthy jobmarketgainsacrossmuchof thecountryandmodest,butimproving,wagegains.Ifthiswasthesoleexplana-tion, thenwewouldhavemore comfortwith the risksaroundthebaselineforecast.But,theseinfluencesalonedonotfullyexplainthemagnitudeofstrengthoverthefirsthalfoftheyear.Webelievethe‘wealtheffect’ofpastgains inhousingandotherwealth (alongside lowbor-rowingcosts)ishavinganoutsizedimpactonconsumerbehavior,beyondhistoricalexperiences.

Byourestimates,thiswealtheffectmayhaveaccountedforasmuchas2percentagepointsofthe5%annualizedgrowth-surge in household spending in the first half of2017.Alookattheregionallandscapeaddscredencetothisview.InOntario,wherehomepricegainshavebeen

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017 2018

CHART 7: A SLOWER BUT STILL SOLID PACE OF GROWTH LIKELY FOR CANADA

Source: Statistics Canada, TD Economics

GDP, Q/Q SAAR.

Forecast

Potential (Trend) Growth


https://economics.td.com/phillips-curve-for-canada

7


thehottestoverthepastfewyears,retailsalesgainshavesurpassed the national average despite job gains thathavelargelyruninline(orslightlybelow)average.

TheslowdowninhousingactivityinOntario–whichbeganthisspringfollowingthe implementationoftheprovincialgovernment’sFairHousingPlan–isthusasignificantgamechanger.Importantly,theadjustmentinhomepricesintheregionisnotexpectedtoleadtoabroaderfinancialdis-tress among households (see report), and offsets resideinotherpartsofthecountrythatcontinuetoenjoyrisinghomevaluations,alongsidetighteninglabourmarkets.But,the spending-impulse from thewealth effect inOntario,and also B.C., is destined to fade with time, particularlywhencombinedwithhigherborrowingcosts.Thisshouldreconnect consumption behaviour with income and jobfundamentals.Ultimately,thissupportsspendinggrowthofroughly2%throughtheforecast,whichishealthybymoststandards.

Headwinds to exports may be tailwinds to investmentTheBankofCanada’sone-twopunchon interestratesmaybeavoteofconfidenceon theeconomic funda-mentals,butithascomewithacurrencythatstrength-ened roughly 7% on a trade-weighted basis from thelowsseenearlierthisyear.Whilesomeofthisstrengthislikelytobereversedover2018and2019ascentralbanksinotheradvancedeconomies(U.S.andEurope)tightenmonetarypolicy,itwillserveasanear-termheadwindtoanalreadychallengedexport sector.Consequently,wehavereviseddowntheoutlookfornettrade.

Itgoeswithoutsayingthatasarelativeprice,movesinthecurrencyaren’tuniversallynegative.Forfirmslookingtoexpandorupdatetheir(oftenimported)capitalstock,astrongerdollarcanhelpmakethedecisioneasier,particu-larlyforindustriesthattendtohavearelativelylargerdo-mesticcustomerbase.Atthesametime,manufacturingcapacityutilizationratestickeduptopre-crisislevelsinthemostrecentdata,andmomentumininvestment-relatedcategories of output, such as capital goods productionandimportsremainshealthy.Resourceinvestmentisalsoexpectedtocontinueitsgradualrecoveryfromthecom-modityprice shock in2014/15.Allof thispaintsaback-dropsupportiveofongoingstrength inbusiness invest-ment,whichisexpectedtocontributepositivelytooverallgrowthin2017–thefirsttimeintwoyears(Chart9).

The future is never without risksAnyforecastwillcarryuncertaintyandrisks.Inadditionto risks around NAFTA negotiations and a number oflargehousingmarkets,thepathforconsumerspendingisnotablyuncertain.Ontheplusside, itsperformancesofarthisyearandtherelativedifficultyofquantifyingtheimpactofwealtheffectsmayimplymorenear-termstrengththanexpected.Theconversecanalsobetrue.Thereisalsouncertaintysurroundinghowhighlyindebt-edhouseholdswillreacttorisingborrowingcosts–ex-amples of ‘goldilocks’ deleveraging episodes are fewand farbetween.That said, sucha scenario is clearlytopofmind for theBankofCanada,which has indi-cated that itwill take this ratesensitivity (and the im-pactonthecurrency)intoaccountinsettingmonetarypolicy.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Outlook, June 2017 Actual Result

CHART 8: CONSUMPTION HAS DEFIED EXPECTATIONS

Consumption Bus. InvestmentOthers GDP

Source: Statistics Canada, TD Economics.

Growth, CTG, Q1+Q2 2017 Average.

70

75

80

85

90

95

100

105

2014 2015 2016 2017 2018 2019

CHART 9: HEALTHY BUSINESS INVESTMENT STILL LEAVES LEVEL BELOW 2014 PEAK

Source: Statistics Canada, TD Economics.

Index, 2014Q3 = 100.

Forecast


https://economics.td.com/canadian-regional-housing-outlook-aug-2017

8


Financial Outlook - Turning Off The TapsThe Federal Reserve took yet another step to removemonetaryaccommodationthismonthwiththestartofbalance sheet normalization. It was awidely expectedannouncement,butanimportantoneforTreasuryyields,mortgagerates,anddepositsinthebankingsystem(seereport). Nonetheless, fixed income markets shruggedoffthenewsandTreasuryyieldsremainatthelowendof our fair value range.After four rate hikes andnowareductionofreinvestmentofmaturities,longmaturityTreasuryyieldsarearoundthesameleveltodayaswhentheFedstarteditsnormalizationprocess.

The paradox of low Treasury yields amidst rising ratescanbeexplainedbyacoupleoffactors.Thefirst isanadjustment lower in expectations for future fed policy.Recent weakness in inflation (notwithstanding nascentsignsofanupturninAugust)havepusheddownexpec-tations for the pace of rate hikes and kept downwardpressureontheanticipatedterminalfedfundsrate.

Whatismore,someofthemarket’spricingoffutureratehikes is building in the risk of an economicdownturn.Withtheeconomicexpansionnowheadingintoits9thyear,theriskofaturninthebusinesscycleisinfluencingthemarket’spricingoffuturepolicyrates.

Thesecondfactorweighingonyieldsisalowtermpre-mium–thecompensationinvestorsdemandforholdinglonger-term Treasuries, instead of rolling over shorter-termdebt.Thisiscurrentlynegativeandimpliesnocom-pensationforinterestraterisk.Lowinflationisalsoafactorhere.Typically, interestraterisk isdependentonriskstoaninflationovershoot.Withinflationdisappointingpolicymakerstheworldover, investorsappeartoseelittleriskofasuddenmovehigherininflationandare,therefore,demandingverylittleinthewayofcompensation.

Athirdfactorweighingontermpremiumsisthestill-highlevelofdemandforU.S.Treasuriesasaresultofquantita-tiveeasing(QE).ThisiswheretheFed’snormalizationpro-cesswillmatter.AstheFedslowsitspaceofreinvestmentsandallowsmaturingsecuritiestorunoffitsbalancesheet,thefallindemandwillabatethedownwardpressureonthetermpremium.

For the first time in a long time, the balance of risksaroundthesethreeforcesareallconspiringinthesamedirection–topressureyieldshigher.Despitethemarketrumors,thePhillipscurveisnotdead,justalittlesleepy.Our research suggests that the relationship betweeneconomicslackandinflationissmallerandmoredrawnoutthaninthepast,butcertainlystillexists(seereport).As long as labormarkets continue to tighten, inflationshouldgrindhigher.Asitdoes,thetwofactorsweighingoncurrentyields–diminishedexpectationsforfuturefedpolicyandcompensationforinflationrisk–willbegintomovehigher.

Allof thiswill impact foreignexchangemarkets.WhilemarketsoverthelasttwoyearshaveseriallyunderpricedtheFed,lessdovishcommentaryfromtheECB,aswellasoutrighthawkishnessfromtheBankofCanadaandBankof England, have caused sovereign yield convergencewith Treasuries. Consequently,major currencies are uparound10%versustheU.S.dollar(Chart10).Thesema-jorcurrencieshavealotofoptimismbuiltintothemandcouldbevulnerablewhen theFed reasserts itselfoverthe coming quarters. Unfortunately, in the near-term,thedatawillbenoisyduetoHurricaneHarveyandIrmaeffects,andthismaykeepfinancialmarketexpectationsremainingintheshadowslongerthanisotherwisewar-ranted.WebelievetheFedisstillpreparedtohikeonemoretimebeforetheyearisout,butmarketswillneedsomeconvincing.

0%

2%

4%

6%

8%

10%

12%

14%

16%

2017-01 2017-02 2017-04 2017-06 2017-08

CHART 10: CURRENCY MAJORS SURGING VS USD

CADUSD

EURUSD

GBPUSD

Source: WSJ, TD Economics.

% Difference from 180-day low


https://economics.td.com/us-dollar-and-sense

https://economics.td.com/us-dollar-and-sense

https://economics.td.com/inflation-dynamics-true-world-faith-in-models

9


Q1 Q2 Q3* Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4FCANADAOvernight Target Rate 0.50 0.50 1.00 1.25 1.50 1.50 1.50 1.75 1.75 2.00 2.00 2.253-mth T-Bill Rate 0.52 0.71 1.01 1.38 1.50 1.50 1.63 1.75 1.88 2.00 2.13 2.252-yr Govt. Bond Yield 0.75 1.09 1.58 1.60 1.75 1.85 1.95 2.05 2.15 2.25 2.35 2.455-yr Govt. Bond Yield 1.12 1.38 1.80 1.85 1.95 2.05 2.15 2.25 2.35 2.45 2.55 2.6510-yr Govt. Bond Yield 1.63 1.75 2.10 2.05 2.15 2.25 2.35 2.45 2.55 2.65 2.75 2.8030-yr Govt. Bond Yield 2.31 2.13 2.45 2.50 2.60 2.70 2.80 2.90 3.00 3.10 3.15 3.1510-yr-2-yr Govt Spread 0.88 0.66 0.53 0.45 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.35U.S. Fed Funds Target Rate 1.00 1.25 1.25 1.50 1.50 1.75 1.75 2.00 2.00 2.25 2.25 2.503-mth T-Bill Rate 0.76 1.03 1.02 1.40 1.53 1.65 1.78 1.90 2.03 2.15 2.28 2.402-yr Govt. Bond Yield 1.27 1.38 1.43 1.70 1.85 1.95 2.10 2.25 2.40 2.55 2.60 2.655-yr Govt. Bond Yield 1.93 1.89 1.87 2.20 2.35 2.45 2.55 2.65 2.75 2.85 2.85 2.8510-yr Govt. Bond Yield 2.40 2.31 2.26 2.60 2.70 2.80 2.90 2.95 3.00 3.00 3.00 3.0030-yr Govt. Bond Yield 3.02 2.84 2.81 3.10 3.20 3.30 3.30 3.30 3.30 3.30 3.30 3.3010-yr-2-yr Govt Spread 1.13 0.93 0.83 0.90 0.85 0.85 0.80 0.70 0.60 0.45 0.40 0.35CANADA - U.S SPREADSCan - U.S. T-Bill Spread -0.24 -0.32 -0.01 -0.02 -0.03 -0.15 -0.15 -0.15 -0.15 -0.15 -0.15 -0.15Can - U.S. 10-Year Bond Spread -0.77 -0.56 -0.16 -0.55 -0.55 -0.55 -0.55 -0.50 -0.45 -0.35 -0.25 -0.20

INTEREST RATE OUTLOOK

F: Forecast by TD Bank Group as at September 2017. All forecasts are end-of-period.

Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at September 20, 2017.

20192017 2018

Q1 Q2 Q3* Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4FExchange rate to U.S. dollar Japanese yen JPY per USD 111 112 112 112 110 108 105 105 103 101 100 100 Euro USD per EUR 1.07 1.14 1.19 1.20 1.21 1.22 1.23 1.24 1.25 1.25 1.25 1.25 U.K. pound USD per GBP 1.25 1.30 1.35 1.33 1.35 1.36 1.37 1.38 1.40 1.41 1.42 1.43Exchange rate to Canadian dollar U.S. dollar USD per CAD 0.75 0.77 0.81 0.83 0.83 0.83 0.83 0.82 0.81 0.81 0.80 0.80 Japanese yen JPY per CAD 83.6 86.6 91.1 93.3 91.7 90.0 86.8 86.1 83.7 81.5 80.0 80.0 Euro CAD per EUR 1.43 1.48 1.47 1.44 1.45 1.46 1.49 1.51 1.54 1.55 1.56 1.56 U.K. pound CAD per GBP 1.67 1.69 1.66 1.60 1.62 1.63 1.66 1.68 1.72 1.75 1.78 1.79

FOREIGN EXCHANGE OUTLOOK2019

F: Forecast by TD Bank Group as at September 2017. All forecasts are end-of-period.

Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at September 20, 2017.

20182017Currency Exchange rate

Q1 Q2 Q3* Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4FCrude Oil (WTI, $US/bbl) 52 48 50 49 50 51 52 53 54 55 55 56Natural Gas ($US/MMBtu) 2.99 3.04 3.14 3.00 3.10 3.15 3.20 3.20 3.25 3.25 3.25 3.25Gold ($US/troy oz.) 1218 1258 1300 1275 1300 1300 1325 1325 1350 1350 1350 1350Silver (US$/troy oz.) 17.47 17.22 17.14 17.25 18.50 18.50 19.25 19.25 19.00 19.00 19.00 19.00Copper (cents/lb) 264 257 294 275 275 280 280 284 282 282 282 282Nickel (US$/lb) 4.66 4.19 5.05 4.50 4.50 4.75 5.00 5.00 6.00 6.00 6.00 6.00Aluminum (cents/lb) 84 87 96 88 90 90 92 92 95 95 95 95Wheat ($US/bu) 6.53 6.80 6.85 6.60 6.50 6.75 7.00 7.25 7.50 7.50 7.75 8.00F: Forecast by TD Bank Group as at September 2017. All forecasts are period averages.

Source: Bloomberg, TD Economics, USDA (Haver). * Spot rate as at September 20, 2017.

COMMODITY PRICE OUTLOOK20182017 2019


10


Q1 Q2 Q3F Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F 17F 18F 19F 17F 18F 19F

Real GDP 3.7 4.5 2.3 2.0 2.0 1.8 1.8 1.7 1.7 1.6 1.7 1.6 3.1 2.1 1.7 3.1 1.8 1.7

Consumer Expenditure 5.0 4.9 2.8 2.3 2.1 1.8 1.8 1.6 1.6 1.5 1.6 1.3 3.6 2.3 1.6 3.6 1.9 1.5

Durable Goods 13.6 9.4 4.0 1.0 1.7 1.6 1.4 1.5 1.6 1.5 1.6 1.4 7.3 2.2 1.5 6.9 1.5 1.5

Business Investment 14.4 7.3 5.4 4.2 4.3 3.8 3.7 3.4 3.3 3.1 2.8 2.6 1.6 4.4 3.3 7.6 3.8 3.0

Non-Res. Structures 3.9 9.8 7.2 4.5 4.6 3.8 3.5 3.1 2.9 2.6 2.4 2.3 -0.8 4.8 2.9 6.3 3.7 2.5

Equipment & IPP* 24.6 4.8 3.9 4.0 4.1 3.9 4.0 3.8 3.7 3.6 3.2 2.9 4.1 4.0 3.6 9.0 3.9 3.3

Residential Investment 12.3 -4.7 -5.1 -4.3 -2.4 -2.0 -0.9 0.3 1.8 2.7 2.6 2.7 1.6 -2.8 1.3 -0.7 -1.3 2.4

Govt. Expenditure 0.7 2.2 4.4 2.8 2.0 1.8 1.7 1.6 1.6 1.6 1.6 1.5 1.8 2.3 1.6 2.5 1.7 1.6

Final Domestic Demand 5.1 3.5 4.2 2.1 2.0 1.8 1.8 1.7 1.8 1.8 1.8 1.6 2.9 2.3 1.8 3.7 1.8 1.7

Exports 1.5 9.8 0.1 3.5 3.3 2.9 3.0 2.8 2.9 2.8 2.9 2.9 2.7 3.2 2.9 3.6 3.0 2.9

Imports 15.6 7.3 2.4 3.5 3.3 2.6 2.7 2.6 2.8 2.9 2.8 2.7 3.9 3.2 2.8 7.1 2.8 2.8

Change in Non-farmInventories (2007 $Bn) 11.7 13.0 11.9 11.1 11.0 10.8 10.4 9.9 9.1 8.5 8.2 8.1 11.2 10.5 8.4 --- --- ---

Final Sales 1.1 4.5 2.1 2.1 2.0 1.8 1.9 1.8 1.9 1.8 1.8 1.7 2.5 2.1 1.8 2.4 1.9 1.8

International CurrentAccount Balance ($Bn) -51.7 -65.3 -61.5 -57.5 -57.0 -59.4 -58.2 -58.2 -50.2 -48.8 -42.4 -40.4 -59.0 -58.2 -45.5 --- --- ---

% of GDP -2.4 -3.1 -2.9 -2.7 -2.6 -2.7 -2.6 -2.6 -2.2 -2.1 -1.8 -1.7 -2.8 -2.6 -2.0 --- --- ---

Pre-tax Corp. Profits 44.9 -7.5 7.2 6.1 6.3 6.8 6.0 5.2 5.5 5.5 5.5 5.5 22.9 5.4 5.6 11.1 6.1 5.5

% of GDP 12.7 12.4 12.5 12.6 12.6 12.7 12.8 12.8 12.9 12.9 13.0 13.1 12.5 12.7 13.0 --- --- ---

GDP Deflator (y/y) 3.0 2.5 2.3 1.5 1.0 1.9 1.9 2.0 2.1 2.0 2.0 2.0 2.3 1.7 2.0 1.5 2.0 2.0

Nominal GDP 8.0 2.9 4.3 3.7 3.8 3.9 3.9 3.9 3.8 3.6 3.7 3.6 5.5 3.8 3.8 4.7 3.9 3.7

Labour Force 1.2 0.8 0.7 0.8 0.7 0.7 0.7 0.7 0.6 0.6 0.7 0.6 1.1 0.7 0.6 0.9 0.7 0.6

Employment 2.1 1.6 1.8 1.1 1.0 0.9 0.7 0.5 0.5 0.5 0.4 0.5 1.7 1.0 0.5 1.6 0.8 0.5

Change in Empl. ('000s) 94.9 72.7 80.3 50.7 46.1 39.3 30.6 23.2 24.2 22.3 18.7 21.0 314 193 98 299 139 86

Unemployment Rate (%) 6.7 6.5 6.2 6.2 6.1 6.1 6.1 6.1 6.1 6.2 6.2 6.2 6.4 6.1 6.2 --- --- ---

Personal Disp. Income 3.0 6.8 1.1 3.4 4.1 3.2 3.0 2.9 3.5 3.0 2.8 2.8 4.2 3.4 3.1 3.6 3.3 3.0

Pers. Savings Rate (%) 4.3 4.6 4.4 4.6 4.7 4.7 4.9 4.8 4.8 4.8 4.7 4.7 4.5 4.8 4.8 --- --- ---

Cons. Price Index (y/y) 1.9 1.4 1.3 1.4 1.2 1.6 1.7 1.7 1.8 1.9 1.9 2.0 1.5 1.5 1.9 1.4 1.7 2.0

CPIX (y/y)** 1.5 0.9 0.8 0.8 0.7 1.1 1.3 1.6 1.6 1.8 1.9 2.0 1.0 1.2 1.8 0.8 1.6 2.0

BoC Inflation ( y/y)** 1.6 1.4 1.6 1.6 1.7 1.8 1.8 1.8 1.8 1.9 2.0 2.0 1.5 1.8 1.9 1.6 1.8 2.0

Housing Starts ('000s) 228 203 215 211 200 196 194 189 191 193 192 195 214 195 193 --- --- ---

Home Prices (y/y) 4.0 4.6 4.3 1.9 -2.0 -2.5 0.5 2.2 2.8 3.3 3.5 3.5 3.7 -0.5 3.3 1.9 2.2 3.5

Real GDP / worker (y/y) 0.7 2.0 1.2 1.4 1.3 0.8 1.0 1.0 1.1 1.1 1.2 1.2 1.3 1.0 1.2 1.4 1.0 1.2

F: Forecast by TD Economics as at September 2017.

*Intellectual Property Products. ** CPIX: CPI excluding the 8 most volatile components. BoC Inflation: simple average of CPI-trim, CPI-median, and CPI-common

Home price measure shown is the CREA Composite Sale Price

Sources: Statistics Canada, Bank of Canada, Canada Mortgage and Housing Corporation, CREA, TD Economics.

CANADIAN ECONOMIC OUTLOOK:Period-Over-Period Annualized Per Cent Change Unless Otherwise Indicated

2017 2018 2019 Annual Average 4th Qtr/4th Qtr


11


Q1 Q2 Q3F Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F 17F 18F 19F 17F 18F 19F

Real GDP 1.2 3.0 2.1 3.0 1.9 2.1 2.1 2.2 1.8 2.0 2.0 1.9 2.1 2.3 2.0 2.3 2.1 1.9

Consumer Expenditure 1.9 3.3 2.1 3.4 2.1 2.2 2.1 2.2 1.7 2.1 2.1 2.0 2.7 2.5 2.0 2.7 2.2 2.0

Durable Goods -0.1 9.0 7.4 6.7 1.5 2.3 2.4 2.7 2.1 2.9 3.0 3.1 6.3 4.0 2.6 5.7 2.2 2.8

Business Investment 7.1 6.9 4.3 4.1 3.9 4.0 4.0 4.0 3.7 3.5 3.4 3.4 4.5 4.2 3.7 5.6 4.0 3.5

Non-Res. Structures 14.8 6.2 2.7 3.8 3.5 3.8 3.6 3.5 3.4 3.2 3.0 3.0 6.6 3.7 3.4 6.8 3.6 3.2

Equipment & IPP* 5.0 7.1 4.7 4.2 4.0 4.1 4.1 4.2 3.7 3.6 3.6 3.5 3.9 4.4 3.8 5.3 4.1 3.6

Residential Investment 11.1 -6.5 -3.7 4.2 7.2 6.1 3.2 3.4 3.7 5.2 5.1 4.2 1.6 3.4 4.2 1.0 5.0 4.5

Govt. Expenditure -0.6 -0.3 0.1 -0.1 -0.3 0.4 0.4 1.1 1.5 1.3 1.5 1.1 -0.2 0.1 1.2 -0.2 0.4 1.4

Final Domestic Demand 2.4 2.7 1.8 3.0 2.1 2.3 2.1 2.3 2.0 2.3 2.3 2.1 2.4 2.3 2.2 2.5 2.2 2.2

Exports 7.3 3.7 0.9 6.0 5.2 5.7 5.9 5.6 5.5 5.4 5.4 5.3 3.2 4.9 5.5 4.5 5.6 5.4

Imports 4.3 1.6 2.1 7.8 7.2 6.2 5.5 5.7 6.4 6.3 6.3 6.3 4.0 5.8 6.1 3.9 6.2 6.3

Change in PrivateInventories 1.2 1.8 20.5 35.5 44.4 45.6 49.3 52.7 55.1 54.5 52.4 52.7 14.7 48.0 53.7 --- --- ---

Final Sales 2.7 3.0 1.7 2.6 1.7 2.1 2.1 2.2 1.8 2.0 2.1 1.9 2.3 2.1 2.0 2.5 2.0 1.9

International CurrentAccount Balance ($Bn) -454 -476 -501 -530 -565 -588 -602 -614 -625 -635 -648 -660 -490 -592 -642 --- --- ---

% of GDP -2.4 -2.5 -2.6 -2.7 -2.9 -2.9 -3.0 -3.0 -3.0 -3.0 -3.1 -3.1 -2.5 -2.9 -3.1 --- --- ---

Pre-tax Corporate Profitsincluding IVA&CCA -8.3 5.2 3.8 5.1 2.1 3.0 3.5 3.7 3.6 3.5 3.9 4.2 3.5 3.5 3.6 1.3 3.1 3.8

% of GDP 11.1 11.1 11.1 11.1 11.1 11.1 11.0 11.0 11.0 11.0 11.0 11.0 11.1 11.0 11.0 --- --- ---

GDP Deflator (y/y) 2.0 1.6 1.7 1.7 1.4 1.6 1.7 1.7 2.1 2.2 2.3 2.3 1.7 1.6 2.2 1.7 1.7 2.3

Nominal GDP 3.3 4.0 3.8 5.1 2.8 3.7 4.2 4.4 4.3 4.2 4.3 4.2 3.9 3.9 4.3 4.1 3.8 4.3

Labor Force 1.0 0.1 1.1 0.9 1.0 1.0 1.0 1.1 1.0 1.0 0.9 0.8 0.7 1.0 1.0 0.8 1.0 0.9

Employment 1.5 1.3 1.4 1.4 1.5 1.4 1.2 1.1 1.1 0.9 0.8 0.7 1.5 1.4 1.0 1.4 1.3 0.9

Change in Empl. ('000s) 545 484 523 515 537 507 452 415 393 348 303 262 2,160 2,016 1,535 2,068 1,912 1,306

Unemployment Rate (%) 4.7 4.4 4.4 4.3 4.2 4.1 4.1 4.1 4.2 4.2 4.2 4.3 4.4 4.1 4.2 --- --- ---

Personal Disp. Income 5.2 3.5 3.8 5.2 2.9 3.8 4.3 4.4 4.4 4.3 4.3 4.2 3.3 3.9 4.3 4.4 3.9 4.3

Pers. Savings Rate (%) 3.9 3.7 3.8 3.7 3.5 3.4 3.5 3.5 3.6 3.7 3.7 3.7 3.8 3.5 3.7 --- --- ---

Cons. Price Index (y/y) 2.6 1.9 2.1 2.4 1.5 1.9 1.7 1.2 1.9 2.2 2.2 2.2 2.3 1.6 2.1 2.4 1.2 2.2

Core CPI (y/y) 2.2 1.8 1.7 1.8 1.6 1.9 2.0 2.0 2.1 2.2 2.2 2.3 1.8 1.9 2.2 1.8 2.0 2.3

Core PCE Price Index (y/y) 1.8 1.5 1.4 1.4 1.4 1.6 1.7 1.8 1.9 1.9 2.0 2.0 1.5 1.6 2.0 1.4 1.8 2.0

Housing Starts (mns) 1.24 1.17 1.18 1.29 1.30 1.32 1.34 1.37 1.39 1.42 1.44 1.45 1.22 1.33 1.42 --- --- ---

Real Output per hour** (y/y) 1.2 1.3 1.1 1.3 1.4 1.3 1.3 1.2 1.3 1.4 1.4 1.5 1.2 1.3 1.4 1.3 1.2 1.5

F: Forecast by TD Economics as at September 2017.

*Intellectual Property Products. **Non-farm business sector.

Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, TD Economics.

U.S. ECONOMIC OUTLOOK:

Period-Over-Period Annualized Per Cent Change Unless Otherwise Indicated

2017 2018 2019 Annual Average 4th Qtr/4th Qtr


12


DisclaimerThisreportisprovidedbyTDEconomics.Itisforinformationalandeducationalpurposesonlyasofthedateofwriting,andmaynotbeappropriateforotherpurposes.Theviewsandopinionsexpressedmaychangeatanytimebasedonmarketorotherconditionsandmaynotcometopass.Thismaterialisnotintendedtoberelieduponasinvestmentadviceorrecommendations,doesnotconstituteasolicitationtobuyorsellsecuritiesandshouldnotbeconsideredspecificlegal,investmentortaxadvice.ThereportdoesnotprovidematerialinformationaboutthebusinessandaffairsofTDBankGroupandthemembersofTDEconomicsarenotspokespersonsforTDBankGroupwithrespecttoitsbusinessandaffairs.Theinformationcontainedinthisreporthasbeendrawnfromsourcesbelievedtobereliable,butisnotguaranteedtobeaccurateorcomplete.Thisreportcontainseconomicanalysisandviews,includingaboutfutureeconomicandfinancialmarketsperformance.Thesearebasedoncertainassumptionsandotherfactors,andaresubjecttoinherentrisksanduncertainties.Theactualoutcomemaybemateriallydifferent.TheToronto-DominionBankanditsaffiliatesandrelatedentitiesthatcomprisetheTDBankGrouparenotliableforanyerrorsoromissionsintheinformation,analysisorviewscontainedinthisreport,orforanylossordamagesuffered.

2016 2017 2018 2019

G7 (31.8%)* 1.4 2.0 1.9 1.7

U.S. 1.5 2.1 2.3 2.0 Japan 1.0 1.6 1.2 1.3 Euro Area 1.8 2.2 1.7 1.6 Germany 1.9 2.1 1.7 1.5 France 1.1 1.7 1.6 1.5 Italy 1.0 1.5 1.2 1.0 United Kingdom 1.8 1.6 1.6 1.7 Canada 1.5 3.1 2.1 1.7

G7 0.8 1.8 1.4 1.8

U.S. 1.3 2.3 1.6 2.1 Japan -0.1 0.4 0.8 1.3 Euro Area 0.2 1.5 1.2 1.4 Germany 0.4 1.7 1.2 1.4 France 0.3 1.1 0.9 1.3 Italy -0.1 1.4 1.1 1.3 United Kingdom 0.7 2.7 2.5 2.0 Canada 1.4 1.5 1.5 1.9

U.S. 4.9 4.4 4.1 4.2 Japan 3.1 2.9 2.8 2.8 Euro Area 10.0 9.2 8.8 8.5 Germany 6.1 5.8 5.5 5.3 France 10.0 9.6 9.3 9.1 Italy 11.7 11.5 11.3 10.9 United Kingdom 4.8 4.5 4.6 4.8 Canada 7.0 6.4 6.1 6.2

*Share of 2015 world gross domestic product (GDP) at PPP.

Forecast as at Sept 21, 2017.

Source: National statistics agencies, TD Economics.

Forecast

Unemployment Rate (Per cent annual averages)

Consumer Price Index (Annual per cent change)

Real GDP (Annual per cent change)

ECONOMIC INDICATORS: G7 AND EUROPE

2015 Share*Real GDP (%) 2016 2017 2018 2019World 100.0 3.1 3.5 3.6 3.5 North America 19.1 1.6 2.2 2.3 2.1 United States 15.7 1.5 2.1 2.3 2.0 Canada 1.4 1.5 3.1 2.1 1.7 Mexico 1.9 2.3 2.5 2.5 2.7 European Union (EU-28) 16.9 2.0 2.2 1.8 1.8 Euro Area (EU-19) 11.9 1.8 2.2 1.7 1.6 Germany 3.4 1.9 2.1 1.7 1.5 France 2.3 1.1 1.7 1.6 1.5 Italy 1.9 1.0 1.5 1.2 1.0 United Kingdom 2.4 1.8 1.6 1.6 1.7 EU accession members 2.6 2.9 2.9 2.6 2.6 Asia 42.9 5.0 5.0 5.1 5.1 Japan 4.5 1.0 1.6 1.2 1.3 Asian NIC's 3.4 2.2 2.8 3.1 2.9 Hong Kong 0.4 2.1 3.5 2.6 2.5 Korea 1.6 2.8 3.1 4.1 3.0 Singapore 0.4 2.0 2.4 2.3 2.2 Taiwan 1.0 1.5 2.1 2.2 2.1 Russia 3.3 -0.2 2.1 1.7 1.5 Australia & New Zealand 1.1 2.7 2.4 3.0 2.7 Developing Asia 30.7 6.5 6.2 6.4 6.3 ASEAN-4 4.8 4.8 5.1 5.1 5.0 China 17.1 6.9 6.6 6.4 6.2 India** 7.0 7.1 6.1 7.2 7.6 Central/South America 6.4 -2.3 1.0 2.3 2.8 Brazil 2.8 -3.6 1.0 2.9 3.0 Other Developing 13.8 3.0 3.3 3.2 3.2 Other Advanced 1.0 2.0 1.6 2.0 2.0 *Share of world GDP on a purchasing-power-parity (PPP) basis.

Forecast as at Sept 21, 2017. **Forecast for India refers to fiscal year.

Source: IMF, TD Economics.

Forecast

GLOBAL ECONOMIC OUTLOOKAnnual per cent change unless otherwise indicated


Quarterly Economic Forecast - TD Bank, N.A. · Quarterly Economic Forecast International Highlights...

Documents

Transcript of Quarterly Economic Forecast - TD Bank, N.A. · Quarterly Economic Forecast International Highlights...