HIGHLIGHTS OF THE WEEK – June 1

United States

• The U.S. economy contracted in the first quarter of 2015, with real GDP declining by an annualized 0.7%. Still, the second reading was better than market expectations which called for a decline of 0.9%.
• Despite the slowdown at the start of the year, a handful of high-frequency indicators released this week continued to point towards a reacceleration in economic activity. Durable goods orders, new home sales and pending home sales surprised to the upside.
• That being said, the second quarter will not be a blockbuster, with growth likely coming in around 1.5%-2%. Assuming that economic momentum continues to gain traction in the coming months, even the relatively modest Q2 performance should still be sufficient for the forward-looking Fed to keep a September hike on the table.

Canada

• Canadian Q1 GDP data are finally in, and as expected the collapse in oil prices late last year took a substantial toll. Canadian real GDP contracted 0.6% annualized in the first quarter of this year. The hit to income was more pronounced with nominal GDP down an even larger 2.9%.
• The hand-off into the second quarter of this year is also disappointing, with industry GDP down 0.2% in March. Our preliminary tracking suggests that real GDP growth could come in around 1% in the second quarter of the year, disappointing the Bank of Canada’s call for a 1.8% gain. This could turn the Bank of Canada a bit more dovish in upcoming meetings.

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 
[email protected]