THE ECONOMIC AND FINANCIAL OUTLOOK

Leslie PrestonEconomist

TD Economics

October 2014

GLOBAL ECONOMY STRUGGLING TO ACCELERATE

-1

0

1

2

3

4

5

6

2002 2004 2006 2008 2010 2012 2014 2016

World GDP growth, Y/Y % Chg.

Source: IMF. Forecast by TD Economics as at September 2014.

Forecast

DEEPLY VARIED REGIONAL PERFORMANCES

-1

0

1

2

3

4

5

6

7

8

U.S. Japan Eurozone China Emerging Mktsex-China

2013 2014 2015

Real GDP growth, Y/Y % Chg.

Source: TD Economics.Forecast by TD Economics as of June 2014.

CHINA'S ECONOMY REBALANCING

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Private Consumption GovernmentConsumption

Total Investment Net Exports

China U.S. Germany

Source: China National Bureau of Statistics, Bureau of Economic Analysis. 2013 Data.

Share of Nominal GDP, %

U.S. REBOUNDS AFTER FROZEN START

-3

-2

-1

0

1

2

3

4

5

2010 2011 2012 2013 2014 2015

Real GDP, annualized quarter/quarter % change

Last data point Q2, 2014. Forecast by TD Economics as of September 2014.Source: Bureau of Economic Analysis.

Forecast

Forecast Y/Y % Chg.(Q4/Q4 % growth)2014F: 2.2% (2.0)2015F: 3.0% (2.8)2016F: 2.7% (2.6)

DIMINISHED FISCAL DRAG AND STRONGER HOUSING RECOVERY TO SUPPORT GROWTH

-5

-4

-3

-2

-1

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014F 2015F 2016F

Final Domestic Demand

Net Exports

Inventory investment

Real GDP

Source: BEA, Forecast by TD Economics as of September 2014

Contribution to real GDP growth; percent

LONG-TERM TREND GROWTH IS LOWER

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1980s 1990s 2000s 2010-2018*

Source: TD Economics. * Includes TD Economics projections.

Potential GDP growth, Avg. Y/Y % Chg., (U.S.)

U.S. DOLLAR ENJOYING A RESURGENCE

60

70

80

90

100

110

120

130

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

2006 2008 2010 2012 2014 2016

Euro (LHS)

Japanese Yen (RHS)

EUR per USD JPY per USD

Source: Haver Analytics. Forecast by TD Economics as at September 2014.

Forecast

LITTLE UPSIDE FOR THE CANADIAN DOLLAR

0.70

0.80

0.90

1.00

1.10

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US$/C$

Forecast

Source: Bank of Canada. Forecast by TD Economics as at September 2014.

RELATIVELY FLAT OUTLOOK FOR COMMODITIES

40

50

60

70

80

90

100

110

120

130

140

50

100

150

200

250

300

350

400

450

500

2006 2008 2010 2012 2014F 2016F

Overall TDCI* (LHS)

Oil-WTI (RHS)

*Index of 18 Canadian resource commodity prices in US$. Forecast as at September 2014.

Forecast

TD Commodity Price Index (Q1, 2002 =100)US$/Barrel

CANADIAN AND U.S. GDP GROWTH RATES TEND TO MOVE TOGETHER

-4

-2

0

2

4

6

8

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

Canada

USA

Source:Haver Analytics, Statistics Canada. Forecast by TD Economics as at September 2014.*Canada: 2007 Chained dollars. United States: 2009 Chained dollars.

Real GDP, Y/Y % Chg.*

Fcst.

Historical Corr. Coeff. = 0.86

COUNTING ON STRONGER EXPORTS

-20

-15

-10

-5

0

5

10

2009 2010 2011 2012 2013 2014 2015 2016

Real Goods Exports

Crude oil production

Source: Statistics Canada. Forecast by TD Economics as at September 2014.

Y/Y % Chg.

Forecast

CONSUMERS PROVIDE SOLID BASE

0

1

2

3

4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Statistics Canada, Haver Analytics. Forecast by TD Economics as of September 2014.

Y/Y % Chg., Real expenditure on goods and services

Forecast

DEBT-TO-INCOME RATIO HAS STABILIZED

0

2

4

6

8

10

12

14

0

20

40

60

80

100

120

140

160

180

1991 1995 1999 2003 2007 2011 2015

Household Debt-to-Income Ratio (lhs)

Household Debt Growth (rhs)

Source: Statistics Canada. Forecast by TD Economics as of September 2014.

% Y/Y % Chg.

Fcst*

HOUSING MARKET HAS PROVED RESILIENT, BUT PRICE GAINS SET TO SLOW

-15

-10

-5

0

5

10

15

20

25

2004 2006 2008 2010 2012 2014 2016

Forecast

Source: Canadian Real Estate Association. Forecast by TD Economics as at October 2014.

Y/Y % Chg., Average existing home prices

INFLATION OUTLOOK NON-THREATENING

-2

-1

0

1

2

3

4

2006 2007 2008 2009 2011 2012 2013 2014 2016

CPI (Total)

Core CPI

Consumer Price Index, Y/Y % Chg.

Forecast

Source: Haver Analytics. Forecast by TD Economics as at September 2014.

INTEREST RATES TO REMAIN LOW

0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012 2014 2016

US Federal Funds Target Rate

Bank of Canada Overnight Rate

Source: Bank of Canada/Haver Analytics. Forecast by TD Economics as of September 2014.

%

Forecast

BOND YIELDS TO RISE, BUT REMAIN WELL BELOW NORMAL

0

1

2

3

4

5

6

overnighttarget

3-month 2-year 5-year 10-year 30-year

Current 2015 2018

%, Yield on Canadian Bonds

Source: Bloomberg, TD Economics. As at October 6, 2014.

SOME CONVERGENCE IN PROVINCIAL GROWTH

0.0 1.0 2.0 3.0 4.0 5.0 6.0

Atlantic

Sask.

Québec

Manitoba

Ontario

B.C.

Canada

Alberta

2013E 2014-15F

E,F: Estimate, Forecast by TD Economics as of September 2014.

Real GDP growth, Y/Y % Chg.

ONTARIO JOB MARKET TO SHOW SOME IMPROVEMENT

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F

Employment (right axis)

Unemployment Rate (left axis)

Source: Haver Analytics. Forecast by TD Economics as at September 2014.

Unemployment rate, % Employment growth, %

ONTARIO ENJOYS GOOD OVERALL DEMOGRAPHICS

0.6

-2 0 2 4 6 8 10

Windsor

Thunder Bay

St. Cath. - Niag.

Welland

Grtr. Sudbury

Peterborough

London

Hamilton

Kingston

Kitchener

Oshawa

Ottawa-Gat.

Toronto

Source: Statistics Canada, 2011 Census. *Over 2006-11 period.

P

%, Population growth*

BUT ITS ECONOMIC MODEL HAS CHANGED

60

70

80

90

100

110

120

130

140

150

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Public Sector

Other Goods andServices

Manufacturing

Empoyment by Industry, Index 2002 = 100 (Ontario)

Source: Statistics Canada and Haver Analytics. As at Q3, 2014.

EXPORT ORIENTED INDUSTRIES TO LEAD PACK

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Construction

Public Services

Total

Retail

Accomm. & Food

Primary

Manufacturing

Wholesale

Transport & Ware.

Forecast by TD Economics as at September 2014.

Ontario real GDP growth, Y/Y % Chg., by selected industries, (2014-15 Avg.)

ONTARIO GOVERNMENT STILL FACING BIG DEFICITS

0

5

10

15

20

25

30

35

40

45

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

07-08 08-09 09-10 10-11 11-12 12-13 13-14e* 14-15f 15-16f 16-17f 17-18f

Balance to GDP (LHS)

Net Debt to GDP (RHS)

*Expected. Source: Ontario Ministry of Finance, 2014 Budget.

Ontario Budgetary Balance as a % of GDP

Forecast

Ontario Net Debt to GDP ratio

THE REGION AT A GLANCE

INDICATORS WellandSt. Catharines-

NiagaraCanada

Population 52,585 407,878 34,931,599

Average Growth over 2006-11 0.60% 0.50% 5.90%

% of population 65+ 17.9% 18.9% 14.8%

Average Household Income $66,946 $74,367 $85,792

Participation Rate 62.4% 63.8% 66.7%

% of pop. 25+ with more than a HS degree 47.3% 51.0% 56.6%

Source: FP Markets, July 1st, 2012 estimate.

UNEMPLOYMENT RATE TO TRAIL PROVINCIAL TREND

4

6

8

10

12

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Canada Ontario St. Cath-Niagara*

Source: Canada Census, Haver Analytics. Forecast by TD Economics as at October 2014. * 2014 figure is year-to-date average.

Forecast

Unemployment rate, %

WELLAND'S LARGEST EMPLOYERS GAINED MORE THAN 100 JOBS OVER THE PAST YEAR

0 200 400 600 800 1,000 1,200 1,400

Welded Tube Canada

Vesuvius Canada Inc.

E.D. Products Ltd.

McDonald’s Restaurant

PowerBlades

Wal-Mart Canada

Zehr’s

Bosch Rexroth

Niagara Catholic District School Board

Corporation of the City of Welland

Convergys CMG Canada Ltd. Partnership

Niagara College Canada

District School Board of Niagara

Niagara Health System – Welland Hospital Site

Canadian Tire Financial Services

2014

2013

Source: City of Welland, Business Directory.

Number of employees

ST. CATHERINE'S & DISTRICT HOUSING PERFORMANCE

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

180,000

190,000

200,000

210,000

220,000

230,000

240,000

250,000

260,000

270,000

280,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Average Residential Price Unit Sales

Source: Canadian Real Estate Association. Forecast by TD Economics as at October 2014.

Average Residential Price ($)Resale Activity (Units)

Fcst.

Geopolitical developments intensify

China's economic rebalancing hits major turbulence

Economic stagnation in Europe and Japan

Renewed market volatility as Fed normalizes policy

DOWNSIDE RISKS TO THE OUTLOOK

UPSIDE RISKS TO THE OUTLOOK

U.S. economy could gain more traction

QE in Europe and Japan could surprise

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