Sunday, March 06, 2011

Latest Economic News from TD Canada Trust

Hello, I thought you might find this an interesting read from TD's
perspective on the economy.

March 1, 2011

Data Release: Tax Cuts Boost Personal Income in January, But Spending

* Personal income bettered market expectations in January jumping 1.0%,
driven largely by payroll tax cuts.

Personal disposable income (PDI) was up 0.7% on the month; however, were it
not for the impact of the tax

changes PDI growth would have been up only a scant 0.1%, after a 0.4% gain
in December.

* Personal consumption expenditures disappointed markets, posting only a
0.2% increase in January. That muted

spending growth pushed the savings rate up a few ticks to 5.8%. The savings
rate had averaged 5.4% in the fourth

quarter of last year.

* Spending was even softer in real terms, down 0.1% on the month - the first
contraction since last April. That

reflected real declines in nondurables (-0.2%) and services (-0.1%), with
spending on durables managing to

register a 0.3% gain.

* Inflation as measured by the personal consumption deflator rose to 1.2%
unchanged from December, while core

PCE inflation (ex food & energy) is running at a 0.8% pace year-on-year, the
same reading for four months now.

Key Implications

* Today's disappointing showing for real consumer spending means that we
will likely have to revise down our target

for first quarter consumer spending. We see consumer spending posting a
closer to 2.5% pace in Q1, down from

our previous expectations of 2.9%. And in turn will likely result in
slightly lower real GDP growth than we had been

expecting for Q1.

* That said, the US saw some pretty significant storms in January, and we
could see a comeback in the months

ahead, particularly given the healthy headline income gain, although not
soon enough to save real spending in Q1.

* January's poor spending performance also stands in stark contrast to the
more positive mood consumers have

been reporting in recent confidence surveys, suggesting that the healthy
income gains should lead to decent

consumer spending growth in 2011. Friday's payrolls reading for February
will be eagerly awaited to see if jobs

growth will pick up to further underpin sustained spending growth ahead.

I hope this finds you Happy and Healthy!

All the Best!


A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc.
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