TD/ Canada Trust Economic Highlights – February 27


United States
• The outlook for economic growth got a bit rosier this week with the release of the preliminary February
survey results of purchasing managers that showed economic momentum continuing to build at the start
of 2017.
• The data flow this week was light for the U.S., but existing home sales for January confirmed that the
U.S. housing market remains resilient despite the uptick in mortgage rates. Still, the outsized strength in
January is unlikely to be maintained, as a number of temporary factors come off in upcoming months.
• Little news in the FOMC minutes other than a confirmation that the U.S. economy was evolving in line with
expectations. Overall, the FOMC remains confident that the slow and steady absorption of economic slack,
and the corresponding progress of inflation toward its 2% target, warrants a gradual pace of tightening of
monetary policy.

• A soft December retail sales report was a blemish on the otherwise constructive fourth quarter data flow
for the Canadian economy.
• We continue to expect the Canadian economy to have grown by 2.2% in 2016Q4, above the Bank of
Canada’s expectations of 1.5% advance. Net trade, consumption, government spending, and residential
investment are all expected to have contributed to growth.
• For the Bank of Canada, we expect the focus at next week’s decision to remain on the strength of the
currency, rising longer-term borrowing costs, and still weak underlying inflationary pressures. As such,
we remain of the view that the Bank of Canada is unlikely to move its policy interest rate from 0.50% any
time soon.

For further information, please contact:

John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446