other commodity prices rose in the years before the 2014 oil price shock, so did our dollar, making our non - commodity exports to the united states less competitive and reinforcing the ongoing shift from manufacturing to services. as i mentioned earlier, this is likely reducing the level of investment. now, let ’ s look at the structural factors that affected business investment during this period. i ’ ll focus on two : demographics and productivity growth. population aging under way across most advanced economies has led to a marked slowdown in labour force growth, and this has been a strong headwind to investment. in canada and the united states, for example, the annual growth rate of the labour force slowed from around 1 1 / 4 per cent in 2006 to less than 1 / 2 per cent in 2016. 11 this decline has reduced potential output growth and investment demand. low productivity growth since 2007 has also been a headwind on business investment. however, while demographic shifts are fairly predictable, it is less clear how much of the decline in productivity growth reflects a structural change and how much is a cyclical response to the subdued recovery. for example, the loss of existing firms and the low creation rate of new firms during and after the great recession have not only directly reduced investment but also impaired the dynamism of the private sector, causing persistent, adverse effects on productivity growth. 12 5 / 9 bis central bankers'speeches all of these challenges have increased uncertainty about the strength of future demand and weighed on business confidence. as a result, canadian firms have acted cautiously in their investment decisions, despite operating close to capacity in some industries. in some cases, they have met any increases in demand by hiring more labour. so that ’ s how we got to where we are. let me now take you through our most recent economic outlook for canada. the outlook for the economy and investment let me start by making two important points from our january monetary policy report and march 1st policy rate announcement. first, our outlook since mid - 2016 for gradually increasing global growth is largely consistent with what we have seen in the data. second, heightened concerns about prospective protectionist measures mean that we should not presume that the economic disappointments we have experienced since the great recession are over. that said, the adjustment to the decline in commodity prices is progressing, and activity in resource - related industries appears to have bottomed out. real gdp growth is expected to pick up from 1. 4 per cent in 2016 to slightly above 2. 0 per

lawrence schembri : getting down to business - investment and the economic outlook remarks by mr lawrence schembri, deputy governor of the bank of canada, to the greater vancouver board of trade, vancouver, british columbia, 21 march 2017. * * * i would like to thank russell barnett for his help in preparing this speech. introduction thank you for the invitation to speak here today. my colleagues and i routinely consult the business community, and i welcome the opportunity to share our economic outlook with you and listen to your views. this consultation process is an important ingredient in our policy making. to achieve our monetary policy goal of low, stable and predictable inflation at the 2 per cent target rate, our economy should operate at, or close to, its productive capacity. however, most advanced economies, including ours, have been running well below full capacity since the great recession of 2008 – 09 owing to a persistent deficiency in demand. after years of serial disappointment, recent data suggest that the recovery in the global economy appears to be gaining traction. notably, growth in the us economy is expected to remain solid, supported by robust fundamentals, including a strong labour market with gradually rising wages. for the canadian economy, estimates of the growth of gross domestic product ( gdp ) from statistics canada for the fourth quarter of 2016 came in somewhat stronger than we had anticipated in our january monetary policy report ( mpr ). while the headline number is welcome news, a more detailed analysis suggests continued scope for caution. exports continue to face ongoing competitiveness challenges. and despite recent gains in employment, subdued growth in wages and hours worked continues to reflect persistent economic slack in canada, in contrast to the united states. in particular, one component of gdp that remains concerning is business investment. while investment in the energy sector now appears to be stabilizing after a painful adjustment to the decline in oil and other commodity prices that began in 2014, overall business investment in the economy remains weak. statistics canada also reported that non - residential business investment spending contracted by more than 15 per cent in the fourth quarter of 2016 and by almost 8 per cent for the year as a whole. the current elevated level of geopolitical uncertainty, and the related prevailing uncertainties around the economic outlook, are likely contributing importantly to this continued underperformance in business investment. therefore, it is still too early to assume that the worst is behind us. so business investment is the topic i want to focus on today. it is, i am sure, top