Canadian Current Account Balance - Q4
Release Date: February 29/08
Q3 Result: $11.1B (non-annualized)
TD Forecast: -$0.9B
Consensus: -$0.2B
It's time for Canada to say good-bye to its days of twin surpluses, as the Canadian current account is likely to fall into deficit territory in Q4 2007 for the first time since 1999. We're forecasting a current account deficit of $0.9B, non-annualized, with the deterioration in the CA balance coming from a substantial softening in the goods and services balance over the last couple of quarters. From the previously-released international merchandise trade data, we know that the goods balance fell to only $9.2B for the quarter, from $10.5B in Q3. The services balance is also likely to deteriorate further, since the strength of the Canadian dollar during the quarter likley led to an increase in Canadians vacationing in the U.S., adding to the travel deficit. We think that the cumulative appreciation of the Canadian dollar over the last few years may have finally caught up the Canadian exporters, with the weakness in exports likely to persist through 2008, leading to the first annual current account deficit since 1998
U.S. Personal Income and Spending - January
Release Date: February 29/08
December Result: income +0.5%; spending +0.2%; core PCE deflator +0.2% M/M, 2.2% Y/Y
TD Forecast: income +0.2%; spending +0.3%; core PCE deflator +0.3% M/M, 2.2% Y/Y
Consensus: income +0.2%; spending +0.2%; core PCE deflator +0.2% M/M, 2.2% Y/Y
We're expecting to see U.S. income and spending continue to falter in January, with income taking an especially big hit. Since hours worked fell by 2.3% in January and the economy shed 17,000 jobs, the pace of growth in the wages and salary component will likely weaken substantially, leading income growth to soften to only 0.2% M/M. Meanwhile, we expect spending to come in at 0.3%, matching the gain in January retail sales. However, real personal consumption will likely be much weaker. And with the strength that we saw in core CPI in January, we're expecting to see the core PCE deflator increase by 0.3% on a monthly basis, with the Y/Y measure unchanged at 2.2%.
