The latest numbers on the federal deficit may be positive, but that doesn’t mean that Ottawa is on a fast track to fiscal balance, TD Economics cautions.

The federal government reported Friday that the budget deficit was $2.8 billion in June, and for the first quarter if the latest fiscal year the deficit came in at $7.2 billion, compared to $12.5 billion a year prior. Finance says that the results so far are “broadly consistent” with the projected deficit of $49.2 billion for the current fiscal year.

Finance notes that since the budget, the outlook for nominal GDP, has been revised up based on the June survey of private sector economic forecasters. “However, there remains considerable uncertainty with respect to the strength of the global economic recovery,” it says. “Overall, three months of fiscal information is not sufficient to draw any firm conclusions about the outlook for the year as a whole.”

TD Economics says that the government “appears on track to beat its target and end up with a deficit in the $42-45 billion range.”

However, TD points out that most of the recent deficit reduction is due to a cyclical rebound in GST and personal income tax receipts, along with the lapsing of temporarily higher transfer payments. And, it cautions that “markets should be careful in extrapolating recent budget balance improvements beyond the near-term.”

TD also reiterates that it believes the more difficult challenge will be in the “second phase” of fiscal consolidation, “moving from the cyclical improvement toward the sustainable elimination of deficits.”