TD/ Canada Trust Economic Highlights – Sept 30


United States

  • The third estimate of U.S. real GDP showed that the U.S. economy grew 4.6% in the second quarter, in line with market expectations. This was an upward revision from 4.2% in the second estimate, and came largely on the back of stronger than expected business investment.
  • The housing market was also in the news. Existing home sales fell 1.8% M/M in August. Meanwhile, new home sales rose 18% M/M. The housing market has been a disappointment this year, but momentum at least now appears to be on the rise with homebuilder sentiment sitting at a post-crisis high.
  • Durable goods orders fell by 18.2% M/M in August, but the drop was widely anticipated as it followed a 22.5% rise in July, owing to robust aircraft orders at the Farnborough airshow. Excluding transport goods, durable orders increased by 0.7% M/M and core capital goods orders (non-defense, ex-aircraft) rose by 0.6%, both of which were above expectations.


  • Prospects for higher interest rates in the U.S. economy riled financial markets this week. Canadian equities were hit harder given the economy’s higher dependence on commodities. The S&P/TSX Index is now at a three month low and the Canadian dollar fell below 90 US cents.
  • The tone at the Bank of Canada lately has been a bit more dovish than that of the Fed. However, with the economic data strengthening the case is being made for the Bank of Canada to move along with the Federal Reserve later next year. We expect the first rate hike to come in July of next year.
  • Even when interest rates do eventually start to go up, they will remain lower than they have been histori­cally. The Bank estimates that neutral has fallen to between 3% and 4%, compared to 4.5% to 5.5% prior to the crisis.

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) 767-5442