Archive for the ‘TD Economics’ Category

Quantitative Uneasy

September 17, 2013 Comments off

Quantitative Uneasy (PDF)
Source: TD Economics


+ The Federal Reserve is expected to begin tapering the pace of quantitative easing at its next meeting on September 17-18. While some uncertainty remains regarding the timing, we feel that little would be achieved by delaying further. Rather, we expect the Fed to reduce asset purchases by $10 billion per month, or less, relative to market consensus for $10-20 billion.

+ Interest rates will likely remain close to current levels given that financial markets have already priced in the effect of the reduction in monetary stimulus. In 2014, Treasury yields should resume their slow grind upwards.

+ The implications for financial markets in Canada are somewhat different than for the United States. Volatility will likely remain a key feature in both countries. However,if our base case forecast is proven true and U.S. economic growth accelerates, then both the economy and corporate profits in Canada are likely to underperform their U.S. counterparts. The Loonie is expected to weaken further.

The Federal Reserve’s Exit Strategy And Implications For Canada

June 20, 2013 Comments off

The Federal Reserve’s Exit Strategy And Implications For Canada (PDF)

Source: TD Economics


• The Federal Reserve’s exit from quantitative easing hinges on the progression of the economic recovery. Benign inflationary pressures over the medium term and an acceleration in growth should allow the central bank to begin paring back its large scale asset purchases in the coming months.

• We expect 10-year treasury yields to rise by roughly 100 basis points by the end of next year and continue to trek upwards. But,the path of adjustment is unlikely to be smooth,as markets recalibrate expectations on the Fed’s actions and the impact on the economy.

• For Canada, the impact will mainly be felt through financial markets. Canadian government bond yields would likely face upward pressure alongside their U.S. counterparts,possibly leading to higher borrowing costs for households and businesses.Meanwhile,the Canadian dollar could face additional downward pressure as a result of the Fed’s actions.

Data Release: The changing nature of families in Canada

October 4, 2012 Comments off

Data Release: The changing nature of families in Canada (PDF)

Source: TD Economics

  • Statistics Canada released another snippet of Census information this morning. The data series included families, households and marital status. While this trio might seem like an odd combination, the collective data provide insight on the family dynamic in Canada.
  • The number of total private households increased by 7.1% between 2006 and 2011. This pace is slightly slower than the 7.6% rate seen from 2001-2006.
  • Married couples, as a share of all census families, declined from 2006-11, but still represented 67% of all families in 2011. Increases in common-law couples and lone-parent families were also noted and for the first time, the former exceeded the latter. Same-sex couples also tripled between 2006 and 2011 and accounted for 0.8% of all couple families in 2011.
  • Couples without children (29.5%) continue to outnumber couples with children (26.5%). This trend was first noted in 2006 and the gap between the two segments widened in the 2011 Census edition.
  • During recessionary times, we usually see an uptick in the number of adult children who move in with their parents. This behaviour did not seem to take place to a large extent during or after the global financial 2008-09 crisis, although we do not have the annual data to confirm this hypothesis. About 42% of all people aged 20-29 lived in their parental home in 2011, roughly the same as what was seen in the 2006 Census.
  • Living as a couple is the most common family arrangement for seniors. In 2011, 56% of seniors lived as a couple, slightly more than 54.1% share seen in 2001. Longer life expectancies and better medical care likely contributed to the increase in two-person households. In addition, the vast majority of seniors live in private dwellings as opposed to collective dwellings like nursing homes.

Europe’s Lost Generation

September 10, 2012 Comments off

Europe’s Lost Generation (PDF)
Source: TD Economics


  • Youth unemployment rates are above 50% in the beleaguered economies of Greece and Spain. These are substantially above those in the U.S. and Canada which currently fluctuate around 16% and 14%, respectively. But do these figures really give you the full story?
  • Differences in labour force participation rates can have a material impact on the way the unemployment rate portrays the labour market.
  • Other measures are available which seem to paint a different picture – the ratio of unemployment to the population for Greece and Spain is far closer to those in the U.S. and Canada.
  • However, the seemingly different measures ultimately tell the same story – that young workers are facing difficult conditions all over the industrialized world, but those in Europe are facing almost impossible conditions.

In the wake of the 2008-09 recession, there has been enormous attention on the plight of younger workers. One statistic that is thrown out on an almost daily basis is the massive 50% youth unemployment rates in Greece and Spain. Comparatively, the youth unemployment rates in the U.S. and Canada only ever peaked at 19% and 16%, respectively. But do youth unemployment rates really give you the whole story? There are alternative measures to the unemployment rate which present a seemingly different picture of youth unemployment in Europe. In this report, we discuss some of the details of Europe’s labour market data and compare it to Canada and the U.S. in order to shed light on just how poor the situation is for European youth looking for work.

Perspective: Gridlock in America

November 10, 2011 Comments off

Perspective: Gridlock in America (PDF)
Source: TD Economics

All eyes are on the on-going European financial crisis. This is understandable, as it represents risk number one for the global economy and financial markets. However, the focus on Europe is drawing attention away from the fiscal risk playing out in America.

Washington is in the grips of extreme political gridlock. Congress has been unable – or perhaps unwilling is a better description – to pass a budget this year. The U.S. government is currently operating under a temporary “continuing resolution” that is set to expire on November 18th. During the summer, the parties had such difficulty in reaching a deal to raise the statutory debt ceiling that Standard & Poor’s downgraded the federal government’s long-term credit rating, citing political instability as a key motivating factor. While the debt ceiling was ultimately lifted, Washington could still not agree on the terms of offsetting fiscal consolidation. They agreed to around $900 billion in deficit reduction, but they could not find common ground on a remaining $1.5 trillion of fiscal savings over the next decade. With the Treasury department warning that America could not pay its bills if the negotiations continued, the political system dodged. They raised the ceiling and set up the Joint Select Committee on Deficit Reduction (JSC). The JSC – sometimes referred to as the Supercommittee – is composed of six Democrats and six Republicans. It has been tasked with finding the remaining fiscal savings and issuing a recommendation by November 23 of this year.

Now, a rational approach to fiscal adjustment would be to back-end load the fiscal pain. In other words, don’t apply significant restraint in the near term when the economy is weak – do the bulk farther down the road when one would expect the economy to be stronger. This could well be what the JSC decides should they be able to reach an agreement. However, in order to incent the bipartisan negotiators to reach an agreement, the debt ceiling legislation included potentially steep near-term consequences for inaction. If legislation with $1.2 trillion in savings over the next decade is not enacted by January 15th of next year, this would trigger automatic spending cuts. The amount of the automatic cuts will depend on how much savings the JSC finds in their deliberations. For example, should the JSC find $600 billion in cuts, the remaining $600 billion would come automatically beginning in 2013. In the event that the JSC fails to reach an agreement and the full $1.2 trillion in cuts is triggered, the automatic cuts would amount to a steady $113 billion annual reduction in primary spending starting in 2013 and running over the next nine years.

Moderation in Store for the Canadian Housing Market

July 25, 2011 Comments off

Moderation in Store for the Canadian Housing Market (PDF)
Source: TD Economics

Canada’s housing market appears set for a moderate correction, with resale activity and average prices projected to decline by roughly 15.2% and 10.2%, respectively, over the next two years. A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first time home buyers are expected to be the chief culprits behind the slowdown. With most of these drivers expected to remain supportive to housing demand in the very near term, we anticipate that the brunt of this adjustment will take place in 2012 and into 2013.

This overall picture hides considerable variations in regional performances. Among the twelve major markets profiled in this report, Vancouver and Toronto look poised for larger-than-average declines over the next few years, reflecting in part their exposure to the condominium segment, which appears particularly ripe for a correction. At the other end of the spectrum, prospects are considerably better for housing markets in Calgary, Edmonton and Regina. Still, no market is likely to experience a housing boom over the medium term.

Answers to Common Questions on Canadian Inflation

June 9, 2011 Comments off

Answers to Common Questions on Canadian Inflation
Source: TD Economics

When we speak to clients, few economic indicators generate the same number of questions as inflation. Why does the central bank strip away gasoline prices from its chosen measure of consumer price inflation? How is it that Canadian prices are higher than U.S. prices when the currency is at parity with the U.S. dollar? In particular, we find there is often skepticism that the measured inflation rate — currently 3.3% on a year-over-year basis — accurately captures the true increases in the cost of living. In this report, we attempt to provide answers to some of the most frequent questtions pertaining to trends in consumer prices.