impact on the energy sector. we projected that growth would then pick up, starting in the second quarter. as it turned out, the slowdown in the fourth quarter was sharper and more broad - based than we expected. this came despite strong growth in employment and labour income. while the anticipated slowdown from the energy sector was fairly aligned with our projections, other categories surprised. as such, and given that the data present a mixed picture, i ’ m going to spend a bit more time on the national accounts numbers we received last week. let me walk through the main economic categories, starting with business investment. for 2018 as a whole, investment grew by 2 per cent, which was less than we had expected. this reflected weakness in both the third and fourth quarters. so what might explain this? while many companies were relieved to see the successful negotiations to replace nafta with the canadaunited states - mexico agreement, they continue to wait for the deal to be ratified. it ’ s possible that some companies are delaying investments amid the uncertainty. and, of course, the uncertainty isn ’ t limited just to the new nafta — global concerns, particularly on the us – china trade front, are clearly hurting confidence and leading firms to delay investment decisions. another possible explanation for the weakness in investment is timing. the accelerated depreciation tax changes announced late last year by the federal government are welcome news for corporations, and it ’ s possible that in anticipation of the changes, investment decisions were postponed. if so, we should begin to see a pickup in the first quarter of this year, which would be consistent with recent quarterly readings from our business outlook survey. we will have an updated survey to further inform our april decision. next up is exports, where the profile was also weaker than expected. one bright spot in exports was services, which grew by more than 6 per cent in the quarter, led by commercial and travel services. i ’ ve already talked a fair bit about housing, and the biggest negative surprise in that category during the fourth quarter came from renovations. as i noted before, there are significant adjustments occurring in housing markets, and it will take time for these adjustments to be completed. nevertheless, the national rate of mortgage credit growth increased slightly, also in the fourth quarter, and we ’ ll see what happens with sales once spring rolls around. and i ’ ll end on the topic of my speech today — consumer spending. it, too, was lower than we expected in

an overall contribution of household spending to annual gross domestic product ( gdp ) that was about 1¼ percentage points lower than it had been in 2017 and is a bit softer than we projected in our january mpr. we have been expecting an adjustment for some time. last march, my colleague deputy governor timothy lane noted in our first economic progress report speech that housing investment and consumption would, over time, contribute less as exports and business investment contribute more. this is partly because in mid - 2017 we had begun to remove some of the policy accommodation that had been in place for many years. since then, we ’ ve increased our policy rate from 0. 50 per cent to 1. 75 per cent in october of last year. our policy rate is transmitted to the economy through various channels. it affects returns on savings and investments as well as borrowing rates. it also has a small direct effect on inflation from higher mortgage interest costs. thus, it affects decision making by households and firms, influencing spending and borrowing patterns. after the global financial crisis, low borrowing rates led households to take on debt, primarily through the housing market. the ratio of household debt to disposable income rose and vulnerabilities related to the household sector increased. we have been closely monitoring these developments for some time. research in this area clearly showed that households would be more sensitive to interest rate movements than in past cycles, with the highly indebted most affected. 1 in 2017, we adjusted our models to account for this increased sensitivity. housing turning to the housing market, a combination of factors — some new and some already in place — affected it throughout 2018. 2 / 6 bis central bankers'speeches first, additional mortgage guidelines were introduced in january. they were aimed at improving the future resilience of new household debt. the guidelines introduced a new stress - test requirement for low - ratio mortgages. for some households, this meant a reduction in the amount that they could borrow. borrowers can adjust through various channels. they could choose to purchase a smaller home, buy in a different neighbourhood, rent rather than buy, or delay their purchase by saving for a larger down payment or waiting for prices to adjust. 2 the guidelines are having their intended effect. the quality of new borrowing has improved, with far fewer households taking out a mortgage with a debt - to - income ratio above 450 per cent. 3 second, rules were put in place over the past three years by various provincial and municipal governments to curb speculative activity