THE WEEKLY BOTTOM LINE

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1 THE WEEKLY BOTTOM LINE TD Economics HIGHLIGHTS OF THE WEEK First quarter GDP growth came in at just 0.7% (annualized) - slightly weaker than consensus. The main culprit behind the slowdown was consumer spending, which barely grew. Much of the drag on growth appears to be temporary and we expect activity to rebound above 3% in the second quarter. The U.S. administration brought tax reform back into the limelight by releasing a revised one-page blueprint. An emphasis on tax cuts, coupled with a sigh of relief stemming from the French presidential election results, revived appetite for risk assets and helped lift major U.S. stock indices. The possibility of a government shutdown remains a near-term risk. Should it take place, the impact would likely not be enough to derail the economy, provided the shutdown is not prolonged. THIS WEEK IN THE MARKETS Current* Week Ago 52-Week High 52-Week Low Stock Market Indexes S&P 500 2,389 2,349 2,396 2,001 S&P/TSX Comp. 15,570 15,614 15,922 13,564 DAX 12,434 12,049 12,473 9,269 FTSE 100 7,219 7,115 7,430 5,924 Nikkei 19,197 18,621 19,634 14,952 Fixed Income Yields U.S. 10-yr Treasury Canada 10-yr Bond Germany 10-yr Bund UK 10-yr Gilt Japan 10-yr Bond Foreign Exchange Cross Rates C$ (USD per CAD) Euro (USD per EUR) Pound (USD per GBP) Yen (JPY per USD) Commodity Spot Prices** Crude Oil ($US/bbl) Natural Gas ($US/MMBtu) Copper ($US/met. tonne) Gold ($US/troy oz.) *as of 10:15 am on Friday **Oil-WTI, Cushing, Nat. Gas-Henry Hub, LA (Thursday close price), Copper-LME Grade A, Gold-London Gold Bullion; Source: Bloomberg. S&P 500 Russel 2000 Dax FT 100 Nikkei 225 US 10Y T-Note USD:EUR USD:JPY USD:GBP USD:CAD USD:MXN USD:CNY Gold WTI Brent WEEKLY MOVES W/W % chng Note: Data as of April 28, 13:00 ET. Change from end of prior week. Sources: Bloomberg, TD Economics GLOBAL OFFICIAL POLICY RATE TARGETS Current Target Federal Reserve (Fed Funds Rate) % Bank of Canada (Overnight Rate) 0.50% European Central Bank (Refi Rate) 0.00% Bank of England (Repo Rate) 0.25% Bank of Japan (Overnight Rate) -0.10% Source: Central Banks. TD ECONOMICS KEY FORECASTS Current Rate /28/17 q1 q2 q3 q4 q1f q2f q3f q4f Fed Funds Target Rate (%) yr Govt. Bond Yield (%) yr Govt. Bond Yield (%) yr Govt. Bond Yield (%) Real GDP (Q/Q % Chg, Annualized) 0.7 (Q1-17) CPI (Y/Y % Chg.) 2.4 (Mar-17) Unemployment Rate (%) 4.5 (Mar-17) Forecast by TD Economics. Source: Bloomberg, TD Economics.

2 first quarter growth soft, activity expected to rebound The week was light on primary data releases, with the advance estimate of first-quarter GDP dominating headlines. Growth was anticipated to be soft, and came in at just 0.7% (annualized). This is on par with our estimate, but slightly weaker than consensus and marks another year of soft firstquarter growth. The main culprit behind the slowdown was consumer spending, which barely grew (in what is becoming something of a pattern) (Chart 1). Not all was bad news however, as non-residential business investment growth accelerated, with the pickup led by a boom in spending on structures. As was the case in prior years, much of the drag to growth appears temporary, and we expect activity to rebound above 3% in the second quarter. Looking past the quarterly swings in GDP, we anticipate growth in the U.S. economy to run slightly above 2% a rate still strong enough to generate a pickup in inflation (see report). Second tier economic data came in somewhat mixed, with a surge in new home sales, acceleration in employee compensation, resilient pending home sales, and some pullback in consumer confidence. Still, investor attention was primarily focused on political events. The U.S. administration brought tax reform back into the limelight by releasing a revised one-page blueprint. An emphasis on tax cuts, coupled with a sigh of relief stemming from the French presidential election results, where pro-eu candidate Macron took the lead in the first round, revived appetite for risk assets. This helped lift major US stock indices, while lowering prices for safe-haven assets such as gold (Chart 2). The updated tax blueprint is broadly similar to its prior version. Differences include tweaks to individual tax rates CHART 1: CONSUMER'S WEAK Q1 BECOMING A PATTERN, EXPECTED TO REBOUND AHEAD Q/Q % Chg. (annualized) 4-yr avg Q1 2014Q1 2015Q1 2016Q1 2017Q1 Source: BEA, TD Economics CHART 2: RENEWED APPETITE FOR RISK ASSETS SENDS STOCKS HIGHER Index (End of day reading for Friday April 21, 2017 = 100) S&P 500 NYSE Comp. Dow Jones Indu. Avg. Gold spot Fri (Apr 21) Mon Tue Wed Thu Fri (Apr 28) Source: Bloomberg, as at noon, ; TD Economics. and support for a territorial tax system where foreign earnings are exempt from U.S. tax. The absence of a destinationbased cash flow tax, supported by the House Republicans, was also notable. The lack of detail makes it challenging to place a price tag on the plan, but one estimate pegs costs at between $3 and $7 trillion over the next decade. The plan is said to pay for itself, but broad consensus suggests otherwise, and without offsetting cuts the proposed changes are likely to bloat the deficit. Politics continued to capture headlines as President Trump put Canada at the receiving end of his trade rhetoric, focusing on trade irritants between the two countries, including dairy and lumber. Talk was followed by action, as the Dep. of Commerce announced its intention to impose preliminary countervailing duties on Canadian softwood lumber. The move is likely to result in higher prices for wood products, feeding through to higher renovating costs and new home prices (see report). All things considered, the aforementioned developments are unlikely to sway the Fed s decision at next week s FOMC meeting, with the Fed unlikely to resume its hiking cycle until June. The possibility of a government shutdown remains a near-term risk, even as steps taken today will extend funding by one week. Even if it does occur, the impact will not derail the economy provided it is not prolonged. Drawing on the 2013 experience, a two week impasse would likely shave off 0.3 pp from quarterly annualized growth. Still, these effects could become amplified should the ongoing uncertainty spill over into private sector spending and investment decisions. Admir Kolaj, Economist 2

3 U.S. Personal Income & Spending - March* Release Date: May 1, 2017 Previous Result: Income 0.4% m/m, Spending 0.1% m/m TD Forecast: Income 0.2% m/m, Spending 0.2% m/m Consensus: Income 0.3% m/m, Spending 0.2% m/m Nominal PCE (personal spending) is expected to rise 0.2% in March, reflecting a drop in spending on durables and modest gains across nondurables and services expenditures. We eye some downside risk in light of the advance GDP release, which reported a 0.3% pace for Q1 as a whole weaker than what our March forecast implies. Nonetheless, downward revisions to the prior months cannot be excluded, meaning that a 0.2% print in March is not out of reach. We place greater weight on the latter given the strong reported pickup in March core retail sales. Meanwhile, March personal incomes likely grew a more modest 0.2%, in line with the 4.0% annualized growth rate in Q1 as also reported in the advance GDP release. UPCOMING KEY ECONOMIC RELEASES U.S. PERSONAL INCOME AND SPENDING M/M % Chg. Spending Income -0.2 Feb-16 May-16 Aug-16 Nov-16 Feb-17 Source: Bureau of Economic Analysis / Haver Analytics. U.S. ISM Manufacturing Index - April* Release Date: May 1, 2017 Previous Result: 57.2 TD Forecast: 56.9 Consensus: 56.5 We expect a very modest pullback in the April ISM manufacturing PMI to 56.9 vs 57.2 in March, thereby maintaining its recent strength albeit at a slightly softer read consistent with regional surveys through April. All surveys continued to show healthy levels of activity, while the relatively robust Philly Fed survey continued to overshoot the national ISM index. ISM new orders were also little changed near cycle highs in March, reinforcing sustained strength in the headline index in April. If anything, the trend in new orders points to some upside risk for a modest uptick in April. ISM MANUFACTURING INDEX Source: Institute for Supply Management / Haver Analytics 3

4 U.S. Employment - April* Release Date: May 5, 2017 Previous Result: 98k, unemployment rate 4.5% TD Forecast: 165k, unemployment rate 4.6% Consensus: 190k, unemployment rate 4.6% We expect April nonfarm payroll employment to pick up to a 165k pace after a disappointing 98k advance in March. The weak March was partly related to adverse weather effects in our view, hence we expect job growth to resume back towards its recent trend in April. Labor market measures at hand support this view, with regional Fed employment indicators, Conference Board job indicators and jobless claims through April signalling sustained healthy levels of labor demand. By industry, we expect to see manufacturing and mining sectors to continue to contribute positively to job growth, and construction jobs should bounce back after a likely weather-induced slowdown in March. Meanwhile, private services jobs, which slowed to a sub-par 61k increase in March, are expected to rebound back to its recent trend near k. We see limited upside this month as we believe a slower pace of job growth is slowly emerging, consistent with a the labor market that is nearing full employment. The unemployment rate is expected to correct slightly U.S. LABOR MARKET Thousands of jobs % 400 Net Job 350 Change* (lhs) Unemployment 300 Rate (rhs) 0 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 Seasonally-adjusted data; * Change in non-farm payrolls Source: U.S. Deptartment of Labor / Haver Analytics to 4.6% after hitting a new cycle low of 4.5%, in line with a likely pullback in household employment paired with some stabilization in unemployed workers. We also look for a strong 0.4% m/m increase in average hourly earnings in April, reflecting upward bias from calendar effects. That would leave the year-on-year pace unchanged at 2.7%, with risk for a rounding to 2.8% *Forecast by Rates and FX Strategy Group. For further information, contact TDRates&FXCommoditiesResearch@tdsecurities.com 4

5 Release Date RECENT KEY ECONOMIC INDICATORS: April 24-28, 2017 Economic Indicator/Event United States Data for Period Units Current Prior Apr 25 S&P CoreLogic CS US HPI YoY NSA Feb Y/Y % Chg R6 Apr 25 Conf. Board Expectations Apr Index Apr 25 Conf. Board Present Situation Apr Index R5 Apr 25 Conf. Board Consumer Confidence Apr Index R6 Apr 25 New Home Sales Mar Thsd R6 Apr 27 Initial Jobless Claims Apr 22 Thsd R6 Apr 27 Cap Goods Orders Nondef Ex Air Mar P M/M % Chg R5 Apr 27 Durables Ex Transportation Mar P M/M % Chg R5 Apr 27 Durable Goods Orders Mar P M/M % Chg R5 Apr 27 Retail Inventories Mar M/M % Chg Apr 27 Advance Goods Trade Balance Mar USD, Blns R5 Apr 27 Pending Home Sales Mar M/M % Chg Apr 28 Employment Cost Index 1Q Q/Q % Chg Apr 28 Gross Domestic Product Annualized 1Q A Q/Q % Chg Apr 28 Personal Consumption 1Q A Q/Q % Chg Apr 28 Core PCE 1Q A Q/Q % Chg Canada Apr 24 Wholesale Trade Sales Feb M/M % Chg R6 Apr 26 Retail Sales Feb M/M % Chg R5 Apr 26 Retail Sales Ex Auto Feb M/M % Chg R5 Apr 27 CFIB Business Barometer Apr Index Apr 28 Industrial Product Price Mar M/M % Chg R5 Apr 28 Gross Domestic Product Feb M/M % Chg International Apr 24 JN Producer Price Index Services Mar Y/Y % Chg Apr 27 EZ ECB Main Refinancing Rate Apr 27 % Apr 27 EZ ECB Marginal Lending Facility Apr 27 % Apr 27 EZ ECB Deposit Facility Rate Apr 27 % Apr 27 JN Jobless Rate Mar % Apr 27 JN National Consumer Price Index Ex Fresh Food, Energy Mar Y/Y % Chg Apr 27 JN National Consumer Price Index Ex Fresh Food Mar Y/Y % Chg Apr 27 JN National Consumer Price Index Mar Y/Y % Chg Apr 27 JN Retail Trade Mar Y/Y % Chg R5 Apr 28 JN Vehicle Production Mar Y/Y % Chg Apr 28 JN Housing Starts Mar Y/Y % Chg Apr 28 UK Gross Domestic Product 1Q A Y/Y % Chg Apr 28 UK Gross Domestic Product 1Q A Q/Q % Chg Apr 28 EZ Consumer Price Index Core Apr A Y/Y % Chg Apr 28 EZ Consumer Price Index Estimate Apr Y/Y % Chg Source: Bloomberg, TD Economics. 5

6 Release Date Time* UPCOMING ECONOMIC RELEASES AND EVENTS: May 1-5, 2017 Economic Indicator/Event United States Data for Period Units Consensus Forecast Last Period May 01 7:45 Treasury Secretary Steven Mnuchin at Milken Conf May 01 8:30 PCE Core Mar Y/Y % Chg May 01 8:30 PCE Deflator Mar Y/Y % Chg May 01 8:30 Real Personal Spending Mar M/M % Chg May 01 8:30 Personal Income Mar M/M % Chg May 01 9:45 Markit US Manufacturing PMI Apr F Index May 01 10:00 ISM Employment Apr Index May 01 10:00 ISM Manufacturing Apr Index May 02 Wards Total Vehicle Sales Apr Mlns May 03 8:15 ADP Employment Change Apr Thsd May 03 9:45 Markit US Services PMI Apr F Index May 03 10:00 ISM Non-Manf. Composite Apr Index May 03 14:00 FOMC Rate Decision (Upper Bound) May 03 % May 04 8:30 Trade Balance Mar USD, Blns May 04 8:30 Unit Labor Costs 1Q P Q/Q % Chg May 04 8:30 Initial Jobless Claims Apr 29 Thsd May 04 10:00 Factory Orders Mar M/M % Chg May 04 10:00 Factory Orders Ex Trans Mar M/M % Chg May 04 10:00 Durable Goods Orders Mar F M/M % Chg May 04 10:00 Durables Ex Transportation Mar F M/M % Chg May 04 10:00 Cap Goods Orders Nondef Ex Air Mar F M/M % Chg May 05 8:30 Change in Nonfarm Payrolls Apr Thsd May 05 8:30 Unemployment Rate Apr % May 05 8:30 Average Hourly Earnings Apr M/M % Chg May 05 11:30 Stanley Fischer Speaks at Hoover's Monetary Policy Conference May 05 12:45 Fed's Williams Speaks in Keynote in New York May 05 13:30 Fed's Charles Evans at Hoover s Monetary Policy Conference May 05 13:30 Fed's Rosengren, Evans Hoover Institution Canada May 01 7:00 MLI Leading Indicator Mar M/M % Chg May 01 9:30 Markit Canada Manufacturing PMI Apr Index May 04 8:30 Int'l Merchandise Trade Mar CAD, Blns May 04 16:25 Bank of Canada Governor Stephen Poloz Speech in Mexico May 05 8:30 Unemployment Rate Apr % May 05 8:30 Net Change in Employment Apr Thsd May 05 10:00 Ivey Purchasing Managers Index SA Apr Index International May 01 1:00 JN Vehicle Sales Apr Y/Y % Chg May 01 19:50 JN BOJ Minutes of March Meeting May 01 19:50 JN Monetary Base Apr Y/Y % Chg May 01 20:30 JN Nikkei Japan PMI Composite Apr Index May 01 21:45 CH Caixin China PMI Mfg Apr Index May 02 4:00 EZ Markit Eurozone Manufacturing PMI Apr F Index May 02 4:30 UK Markit UK PMI Manufacturing SA Apr Index May 02 5:00 EZ Unemployment Rate Mar % May 03 5:00 EZ Producer Price Index Mar Y/Y % Chg May 03 5:00 EZ Gross Domestic Product SA 1Q A Q/Q % Chg May 03 5:00 EZ Gross Domestic Product SA 1Q A Y/Y % Chg May 04 4:30 UK Markit/CIPS UK Composite PMI Apr Index May 04 5:00 EZ Retail Sales Mar Y/Y % Chg * Eastern Standard Time. Source: Bloomberg, TD Economics. 6

7 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. 7