Derek BurletonVice President and Deputy Chief Economist

April 2011

The Economic Outlook

EMERGING MARKETS COOLINGEMERGING MARKETS COOLING

0

2

4

6

8

10

12

Advanced Brazil India China

2010 2011 F 2012 F

Forecast by TD Economics as at March 2011Source: IMF, National Statistics Agencies, TD Economics

Real GDP, Annual Avg. % Chg.

JAPAN TO DEAL WITH AFTERMATH OF EARTHQUAKE, BUT RECOVERY STILL ON TRACK IN ADVANCED ECONOMIES JAPAN TO DEAL WITH AFTERMATH OF EARTHQUAKE, BUT RECOVERY STILL ON TRACK IN ADVANCED ECONOMIES

0 1 2 3 4 5

Japan

Eurozone

U.S.

Canada

2010

2011F

2012F

Forecast by TD Economics as at March 2011Source: IMF, National Statistics Agencies, TD Economics

Real GDP, annual avg. % chg.

RISK 1 - INFLATION IN EMERGING MARKETSRISK 1 - INFLATION IN EMERGING MARKETS

-5

0

5

10

15

20

25

Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11

Brazil

China

India

Source: National Statistical Agencies

Y/Y % Change in Headline CPI

MONETARY AUTHORITIES RESPONDINGMONETARY AUTHORITIES RESPONDING

0 1 2 3 4 5 6 7 8 9 10 11 12

Brazil

China

India

Australia

New Zealand

Canada

Euro Area

U.K.

U.S.

Japan

Jan 2010 Mar 2011

Policy Interest Rate, %

PercentSource: National Central Banks, TD Economics

0.0% as of Mar 2011

FOOD PRICE INFLATION EXPECTED TO MODERATE FOOD PRICE INFLATION EXPECTED TO MODERATE

90

100

110

120

130

140

150

160

170

180

190

t t+4 t+8 t+12 t+16 t+20 t+24 t+27 t+31

Source: United Nations Food & Agricultural Organization

2007-09 Cycle

2009-2011 Cycle

UN Food Price Index, t=100

RISK 2 - RISK PREMIUM BUILDS IN OIL PRICES AS UNCERTAINTY SURROUNDS MIDDLE EAST RISK 2 - RISK PREMIUM BUILDS IN OIL PRICES AS UNCERTAINTY SURROUNDS MIDDLE EAST

80

82

84

86

88

90

92

94

96

98

100

2000 2002 2004 2006 2008 20100

20

40

60

80

100

120

140

160

Oil Inventories (left axis)

Oil Price* (right axis)

Days supply US$/barrel

*West Texas Intermediate CushingSource: Energy Intelligence Group, WSJ, TD Economics

TD Oil Price Forecast2011 - $94.002012 - $100.00

RISK 3 - SURGING GOVERNMENT DEBT A MASSIVE CHALLENGE RISK 3 - SURGING GOVERNMENT DEBT A MASSIVE CHALLENGE

0

50

100

150

200

250

Japan

Greece Italy

Irelan

dUnite

d States

France

Portugal

Canad

a

United K

ingdomGerm

any

Spain

0

20

40

60

80

100

120

140

Gross Debt Held Domestically (left)

Gross Debt Held Abroad (left)

Net Debt (right)

% of GDP, 2010 % of GDP, 2010

U.S. IMPROVING BUT IT’S STILL A HALF-SPEED RECOVERY U.S. IMPROVING BUT IT’S STILL A HALF-SPEED RECOVERY

11,000

11,500

12,000

12,500

13,000

13,500

14,000

14,500

15,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

No Recession*

Actual & TD Forecast

U.S. Real GDP, $Billions

*Congressional Budget Office. Forecast by TD Economics as at March 2011Source: CBO, BEA, TD Economics

Forecast

JOB GROWTH HAS POTENTIAL TO SURPRISE IN 2011 JOB GROWTH HAS POTENTIAL TO SURPRISE IN 2011

-40

-20

0

20

40

60

1990 1995 2000 2005 2010-6

-3

0

3

6

9

Corporate Profits (lhs)

Private Employment (rhs)

Private employment, Y/Y % Corporate profits*, Y/Y % Chg.

Source: BEA, BLS. *Lagged by three months.

HOUSING STILL THE ACHILLES HEELHOUSING STILL THE ACHILLES HEEL

200

400

600

800

1,000

1,200

1,400

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20101,000

2,000

3,000

4,000

5,000

6,000

7,000

New (lhs)

Existing (rhs)

New single-family home sales (units, 000s) Existing single-family sales (units, 000s)

Source: National Association of Realtors, Census Bureau

FOCUS ON FEDERAL DEFICIT BUT STATE DEFICITS ALSO A MAJOR CHALLENGE FOCUS ON FEDERAL DEFICIT BUT STATE DEFICITS ALSO A MAJOR CHALLENGE

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

New Je

rsey

Maine

Vermont

North C

arolin

aConnec

ticut

New H

ampsh

ireSouth C

arolin

aFlorid

aNew

YorkPen

nsylva

niaMas

sach

usetts

States

Total

Reported to Date Estimated

FY 2011 Projections, Total Shortfall as % of FY 2011 Budget

Source: Center on Budget and Policy Priorities

CANADIAN ECONOMY HAS REGAINED MOMENTUM CANADIAN ECONOMY HAS REGAINED MOMENTUM

-8

-6

-4

-2

0

2

4

6

8

Q1.08 Q1.09 Q1.10 Q1.11 Q1.12

Forecast by TD Economics as at March 2011Source: Statistics Canada/Haver Analytics

Forecast

Canadian Real GDP, Annualized Quarter/Quarter % Change

STRONGER U.S. DEMAND TO DRIVE EXPORTSSTRONGER U.S. DEMAND TO DRIVE EXPORTS

80

85

90

95

100

105

110

115

120

125

1998 2000 2002 2004 2006 2008 2010 2012

U.S. Activity Index*

Canadian Real Exports

Forecast

Index, 2002=100

Forecast by TD Economics as at March 2011*Weighted index of U.S. demand and production variables most important for Canadian exports

HIGHER COMMODITY PRICES PROVIDE A NATURAL HEDGE TO A LOFTY C$ HIGHER COMMODITY PRICES PROVIDE A NATURAL HEDGE TO A LOFTY C$

50

100

150

200

250

300

350

400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201260

65

70

75

80

85

90

95

100

105

110

*TD Commodity Price Index of 18 Canadian resource commodity prices in US$Source: WSJ, TD Economics, Forecast by TD Economics as at March 2011.

TD Commodity Price Index* (lhs)

Forecast

Index, 2002=100 C$/US$ Cents

C$ (rhs)

HIGHLY INDEBTED HOUSEHOLDS TO MODERATE PACE OF SPENDING HIGHLY INDEBTED HOUSEHOLDS TO MODERATE PACE OF SPENDING

-5

-3

-1

1

3

5

7

Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-20127.0

7.5

8.0

8.5Consumer Spending Growth (left axis)

Debt Service Ratio (right axis)Forecast

Forecast by TD Economics as at March 2011Source: Statistics Canada, TD Economics

%% Chg. Annualized

GOVERNMENTS TO START SHIFTING TO RESTRAINTGOVERNMENTS TO START SHIFTING TO RESTRAINT

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Fed. Prov.Total

BC AB SK MB ON QC NB NS

2011-12 Government Balance as a % of GDP*

*No estimate available for Newfoundland & Labrador and PEISource: Government estimates

INFLATION TO STAY TAMEINFLATION TO STAY TAME

-2

0

2

4

6

8

10

12

14

81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11

All-Items CPI

Core CPI*

Inflation Target Band

Y/Y % Chg.

*Headline CPI excl. 8 most volatile components and indirect taxes Forecast by TD Economics as at March 2011. Source: Statistics Canada

Forecast

CANADIAN RATES TO RISE FASTER THAN THE U.S. CANADIAN RATES TO RISE FASTER THAN THE U.S.

0

1

2

3

4

5

6

7

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

%

Forecast by TD Economics as at March 2011Source: Bank of Canada, Federal Reserve, TD Economics

ForecastBank of

Canada Target Rate

US Federal Funds Rate

YIELDS TO GRIND SLOWLY HIGHERYIELDS TO GRIND SLOWLY HIGHER

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Overnight 3-Month 2-Year 5-Year 10-Year 30-Year

Q4 2012 Q4 2011 Current*

*As at March 16, 2011; Forecasts by TD economics as at March 2011Source: Bank of Canada, TD Economics

%

ECONOMIC MOMENTUM SHIFTING TO PRAIRIES ECONOMIC MOMENTUM SHIFTING TO PRAIRIES

2.6

2.4

2.9

3.3

4.3

4.2

2.6

2.3

2.1

2.4

2.3

3.0

3.2

2.3

Atlantic

Quebec

Ontario

Manitoba

Saskatchewan

Alberta

B.C.

2011F

2012F

Forecast by TD Economics as at March 2011Source: Statistics Canada/Haver Analytics

Real GDP Growth By Region, Y/Y % Chg.

VANCOUVER’S GROWTH RATE TO MODERATE

Actual2010 2011 2012

ALL INDUSTRIES (GDP) 3.8 2.4 2.3

GOODS INDUSTRIES 5.8 3.0 2.9

MANUFACTURING 7.2 4.0 3.0

CONSTRUCTION 3.9 0.3 2.0

PRIMARY & UTILITIES 5.5 4.2 4.0

SERVICE INDUSTRIES 3.3 2.3 2.2

ForecastREAL GDP GROWTH BY INDUSTRY (%)

Source: Conference Board; Forecast by TD Economics, Mar. 2011

VANCOUVER ECONOMIC FORECAST: HIGHLIGHTS

Vancouver economy expected to moderate from an Olympic-sized rebound in 2010

Reduced activity in the housing market and fiscal restraint to weigh on city’s service-oriented economy

Goods sector to continue its recovery, albeit hampered by a housing-led construction slowdown

STILL SCOPE FOR VANCOUVER’S JOBLESS RATE TO FALL

3

4

5

6

7

8

9

2000 2002 2004 2006 2008 2010 20121000

1050

1100

1150

1200

1250

1300Unemployment Rate (lhs) Employment (rhs)% (000s)

Source: Statistics Canada, Forecast by TD Economics as at March 2011

Forecast*

TD Economics

www.td.com/economics

This report is provided by TD Economics for customers of TD Bank Group. It is for information purposes only and may not be appropriate for other purposes. 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. The 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 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.