Derek BurletonVice President and Deputy Chief Economist
April 2011
The Economic Outlook
EMERGING MARKETS COOLINGEMERGING MARKETS COOLING
0
2
4
6
8
10
12
Advanced Brazil India China
2010 2011 F 2012 F
Forecast by TD Economics as at March 2011Source: IMF, National Statistics Agencies, TD Economics
Real GDP, Annual Avg. % Chg.
JAPAN TO DEAL WITH AFTERMATH OF EARTHQUAKE, BUT RECOVERY STILL ON TRACK IN ADVANCED ECONOMIES JAPAN TO DEAL WITH AFTERMATH OF EARTHQUAKE, BUT RECOVERY STILL ON TRACK IN ADVANCED ECONOMIES
0 1 2 3 4 5
Japan
Eurozone
U.S.
Canada
2010
2011F
2012F
Forecast by TD Economics as at March 2011Source: IMF, National Statistics Agencies, TD Economics
Real GDP, annual avg. % chg.
RISK 1 - INFLATION IN EMERGING MARKETSRISK 1 - INFLATION IN EMERGING MARKETS
-5
0
5
10
15
20
25
Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11
Brazil
China
India
Source: National Statistical Agencies
Y/Y % Change in Headline CPI
MONETARY AUTHORITIES RESPONDINGMONETARY AUTHORITIES RESPONDING
0 1 2 3 4 5 6 7 8 9 10 11 12
Brazil
China
India
Australia
New Zealand
Canada
Euro Area
U.K.
U.S.
Japan
Jan 2010 Mar 2011
Policy Interest Rate, %
PercentSource: National Central Banks, TD Economics
0.0% as of Mar 2011
FOOD PRICE INFLATION EXPECTED TO MODERATE FOOD PRICE INFLATION EXPECTED TO MODERATE
90
100
110
120
130
140
150
160
170
180
190
t t+4 t+8 t+12 t+16 t+20 t+24 t+27 t+31
Source: United Nations Food & Agricultural Organization
2007-09 Cycle
2009-2011 Cycle
UN Food Price Index, t=100
RISK 2 - RISK PREMIUM BUILDS IN OIL PRICES AS UNCERTAINTY SURROUNDS MIDDLE EAST RISK 2 - RISK PREMIUM BUILDS IN OIL PRICES AS UNCERTAINTY SURROUNDS MIDDLE EAST
80
82
84
86
88
90
92
94
96
98
100
2000 2002 2004 2006 2008 20100
20
40
60
80
100
120
140
160
Oil Inventories (left axis)
Oil Price* (right axis)
Days supply US$/barrel
*West Texas Intermediate CushingSource: Energy Intelligence Group, WSJ, TD Economics
TD Oil Price Forecast2011 - $94.002012 - $100.00
RISK 3 - SURGING GOVERNMENT DEBT A MASSIVE CHALLENGE RISK 3 - SURGING GOVERNMENT DEBT A MASSIVE CHALLENGE
0
50
100
150
200
250
Japan
Greece Italy
Irelan
dUnite
d States
France
Portugal
Canad
a
United K
ingdomGerm
any
Spain
0
20
40
60
80
100
120
140
Gross Debt Held Domestically (left)
Gross Debt Held Abroad (left)
Net Debt (right)
% of GDP, 2010 % of GDP, 2010
U.S. IMPROVING BUT IT’S STILL A HALF-SPEED RECOVERY U.S. IMPROVING BUT IT’S STILL A HALF-SPEED RECOVERY
11,000
11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
No Recession*
Actual & TD Forecast
U.S. Real GDP, $Billions
*Congressional Budget Office. Forecast by TD Economics as at March 2011Source: CBO, BEA, TD Economics
Forecast
JOB GROWTH HAS POTENTIAL TO SURPRISE IN 2011 JOB GROWTH HAS POTENTIAL TO SURPRISE IN 2011
-40
-20
0
20
40
60
1990 1995 2000 2005 2010-6
-3
0
3
6
9
Corporate Profits (lhs)
Private Employment (rhs)
Private employment, Y/Y % Corporate profits*, Y/Y % Chg.
Source: BEA, BLS. *Lagged by three months.
HOUSING STILL THE ACHILLES HEELHOUSING STILL THE ACHILLES HEEL
200
400
600
800
1,000
1,200
1,400
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20101,000
2,000
3,000
4,000
5,000
6,000
7,000
New (lhs)
Existing (rhs)
New single-family home sales (units, 000s) Existing single-family sales (units, 000s)
Source: National Association of Realtors, Census Bureau
FOCUS ON FEDERAL DEFICIT BUT STATE DEFICITS ALSO A MAJOR CHALLENGE FOCUS ON FEDERAL DEFICIT BUT STATE DEFICITS ALSO A MAJOR CHALLENGE
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
New Je
rsey
Maine
Vermont
North C
arolin
aConnec
ticut
New H
ampsh
ireSouth C
arolin
aFlorid
aNew
YorkPen
nsylva
niaMas
sach
usetts
States
Total
Reported to Date Estimated
FY 2011 Projections, Total Shortfall as % of FY 2011 Budget
Source: Center on Budget and Policy Priorities
CANADIAN ECONOMY HAS REGAINED MOMENTUM CANADIAN ECONOMY HAS REGAINED MOMENTUM
-8
-6
-4
-2
0
2
4
6
8
Q1.08 Q1.09 Q1.10 Q1.11 Q1.12
Forecast by TD Economics as at March 2011Source: Statistics Canada/Haver Analytics
Forecast
Canadian Real GDP, Annualized Quarter/Quarter % Change
STRONGER U.S. DEMAND TO DRIVE EXPORTSSTRONGER U.S. DEMAND TO DRIVE EXPORTS
80
85
90
95
100
105
110
115
120
125
1998 2000 2002 2004 2006 2008 2010 2012
U.S. Activity Index*
Canadian Real Exports
Forecast
Index, 2002=100
Forecast by TD Economics as at March 2011*Weighted index of U.S. demand and production variables most important for Canadian exports
HIGHER COMMODITY PRICES PROVIDE A NATURAL HEDGE TO A LOFTY C$ HIGHER COMMODITY PRICES PROVIDE A NATURAL HEDGE TO A LOFTY C$
50
100
150
200
250
300
350
400
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201260
65
70
75
80
85
90
95
100
105
110
*TD Commodity Price Index of 18 Canadian resource commodity prices in US$Source: WSJ, TD Economics, Forecast by TD Economics as at March 2011.
TD Commodity Price Index* (lhs)
Forecast
Index, 2002=100 C$/US$ Cents
C$ (rhs)
HIGHLY INDEBTED HOUSEHOLDS TO MODERATE PACE OF SPENDING HIGHLY INDEBTED HOUSEHOLDS TO MODERATE PACE OF SPENDING
-5
-3
-1
1
3
5
7
Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-20127.0
7.5
8.0
8.5Consumer Spending Growth (left axis)
Debt Service Ratio (right axis)Forecast
Forecast by TD Economics as at March 2011Source: Statistics Canada, TD Economics
%% Chg. Annualized
GOVERNMENTS TO START SHIFTING TO RESTRAINTGOVERNMENTS TO START SHIFTING TO RESTRAINT
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
Fed. Prov.Total
BC AB SK MB ON QC NB NS
2011-12 Government Balance as a % of GDP*
*No estimate available for Newfoundland & Labrador and PEISource: Government estimates
INFLATION TO STAY TAMEINFLATION TO STAY TAME
-2
0
2
4
6
8
10
12
14
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
All-Items CPI
Core CPI*
Inflation Target Band
Y/Y % Chg.
*Headline CPI excl. 8 most volatile components and indirect taxes Forecast by TD Economics as at March 2011. Source: Statistics Canada
Forecast
CANADIAN RATES TO RISE FASTER THAN THE U.S. CANADIAN RATES TO RISE FASTER THAN THE U.S.
0
1
2
3
4
5
6
7
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
%
Forecast by TD Economics as at March 2011Source: Bank of Canada, Federal Reserve, TD Economics
ForecastBank of
Canada Target Rate
US Federal Funds Rate
YIELDS TO GRIND SLOWLY HIGHERYIELDS TO GRIND SLOWLY HIGHER
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Overnight 3-Month 2-Year 5-Year 10-Year 30-Year
Q4 2012 Q4 2011 Current*
*As at March 16, 2011; Forecasts by TD economics as at March 2011Source: Bank of Canada, TD Economics
%
ECONOMIC MOMENTUM SHIFTING TO PRAIRIES ECONOMIC MOMENTUM SHIFTING TO PRAIRIES
2.6
2.4
2.9
3.3
4.3
4.2
2.6
2.3
2.1
2.4
2.3
3.0
3.2
2.3
Atlantic
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
B.C.
2011F
2012F
Forecast by TD Economics as at March 2011Source: Statistics Canada/Haver Analytics
Real GDP Growth By Region, Y/Y % Chg.
VANCOUVER’S GROWTH RATE TO MODERATE
Actual2010 2011 2012
ALL INDUSTRIES (GDP) 3.8 2.4 2.3
GOODS INDUSTRIES 5.8 3.0 2.9
MANUFACTURING 7.2 4.0 3.0
CONSTRUCTION 3.9 0.3 2.0
PRIMARY & UTILITIES 5.5 4.2 4.0
SERVICE INDUSTRIES 3.3 2.3 2.2
ForecastREAL GDP GROWTH BY INDUSTRY (%)
Source: Conference Board; Forecast by TD Economics, Mar. 2011
VANCOUVER ECONOMIC FORECAST: HIGHLIGHTS
Vancouver economy expected to moderate from an Olympic-sized rebound in 2010
Reduced activity in the housing market and fiscal restraint to weigh on city’s service-oriented economy
Goods sector to continue its recovery, albeit hampered by a housing-led construction slowdown
STILL SCOPE FOR VANCOUVER’S JOBLESS RATE TO FALL
3
4
5
6
7
8
9
2000 2002 2004 2006 2008 2010 20121000
1050
1100
1150
1200
1250
1300Unemployment Rate (lhs) Employment (rhs)% (000s)
Source: Statistics Canada, Forecast by TD Economics as at March 2011
Forecast*
TD Economics
www.td.com/economics
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