TD / Canada Trust Weekly Economic Highlights – Dec. 4

HIGHLIGHTS OF THE WEEK – Dec. 4/13

United States

  • Over the next few months, decisions made in Washington will play an outsized role in the outlook for financial markets and the U.S. economy. On Capitol Hill, the House-Senate budget conference committee is in negotiations on a deal to fund the government and reduce automatic spending cuts. A few blocks away, the Federal Reserve is in the midst of deciding the future of its quantitative easing program.
  • The budget committee must present recommendations to Congress by December 13th. In a best case scenario, the negotiations will reduce sequestration, which will otherwise slow economic growth by 0.6 percentage points in 2014.
  • The Federal Reserve is likely to begin tapering asset purchases in the New Year. Once tapering beings,the Fed’s goal will be avoiding a back-up in interest rates. This is likely to require a more direct signal that short term rates will stay on hold even longer than current expectations.

Canada

  • The Canadian economy turned out a decent performance in the third quarter of the year. Real GDP grew by 2.7% annualized – the fastest pace of growth in over two years.
  • Some of the strength in the quarter can be attributed to temporary factors, including a rebound in oil and gas production following supply disruptions during the first half of this year and a sharp inventory build.
  • Still, there were some encouraging underlying details in the GDP report released today. Household and business spending moderately supported economic activity. While net trade was a drag on growth, improvements in exports towards the end of the third quarter spell good news for economic growth in the fourth quarter.
  • The Q3 performance is unlikely to move the Bank of Canada’s monetary policy stance. We expect the Bank of Canada will be on hold at least until the end of 2015.

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

John.Maveety@td.com