talk about the global economy. it plays an important role in our forecasts because we rely on exports for one - third of our gross domestic product ( gdp ). our main trading partners — including the united states, the euro area, china and other emerging markets — continue to show solid growth. such synchronous growth across these regions has not been seen in many years. data we have received since mid - april, notably with respect to the us economy, continue to suggest the global economy is expanding roughly as expected. and while global financial markets continue to function well, financial stresses have recently developed in some emerging - market economies as well as in europe. though global growth will eventually moderate over time as excess capacity is absorbed, the world economy is nonetheless expected to remain strong and to contribute to our export growth. despite a rather slow start to the year, the growth of our goods exports jumped to 3 per cent in march. their contribution to canadian gdp in the first quarter should be greater than what we had forecast in the april mpr. this is encouraging. that said, we know that our exporters are facing increased foreign competition. as we noted in april, the market share of canadian non - energy goods in the united states has shrunk by almost half since the early 2000s. we see this competition in many sectors — from automobiles to electronic goods to forestry — which is why we are monitoring competitiveness very closely, and expect to publish further analysis on this issue in the months ahead. we also know that international trade has undergone some significant changes in the past 10 years. before that, international trade was growing at roughly twice the rate of the global economy. it is now growing at the same rate as the global economy. this, together with more competitive world markets, has been restraining our exports. another important factor is the fact that many of our exporters are already operating at full capacity. at an industrial level, three - quarters of the sectors are at their highest capacity utilization rates since 2003. so investments would be needed to meet rising demand. given ongoing trade policy uncertainty, some firms are waiting to invest in new capacity, while others are deciding to expand outside of canada. this could limit exporters ’ ability to grow further even as foreign demand rises. for their part, canadian oil exports are likely to be stronger than expected in april, following pipeline outages last year. large upward revisions to oil exports in january suggest that oil exporters recovered much faster from these outages than suggested

slower than that in british columbia, contributing to relatively stronger wage growth. interestingly, we also see the impact of labour supply adjustment in regional housing markets. how the labour supply adjusts in the face of rising demand conditions is an issue we are watching closely because it affects the evolution of our economic capacity. for example, given revisions to past investment and our anticipation that trend labour input will rise over the next three years, we increased our estimate of potential output growth in april to 1. 8 per cent. still, with the uncertainty inherent in measuring potential output, we carefully monitor our measures of underlying inflation to ensure they are consistent with our assessment of economic slack. as such, core measures of inflation remain essentially at 2 per cent, consistent with the economy operating at close to capacity. however, higher crude oil prices, on average, relative to our april forecast are expected to lead to a higher headline inflation rate in the near term. monetary policy typically looks through transitory fluctuations such as this, as we did last year when inflation was held down by other temporary factors. 4 see d. brouillette, m. dockrill, h. lao and l. savoie - chabot, “ bending the curves : wages and inflation, ” bank of canada staff analytical note no. 2018 - 15 ( may 2018 ). yesterday ’ s decision this brings me to our decision yesterday to leave our policy rate unchanged at 1. 25 per cent. as we have emphasized several times in the past, our policy decisions remain guided by incoming data, since they inform our outlook for growth and inflation. as such, in reaching yesterday ’ s decision, we carefully weighed the information we have received since our april mpr. let me take a few moments to summarize the developments that factored the most into our deliberations. first, i want to reiterate that the economy is evolving largely as expected, with inflation roughly at our 2 per cent target and economic activity near potential. given this context, we began by acknowledging the better - than - expected tenor of many recent economic indicators. as i outlined earlier, manufacturing and investment activity has been solid, and exports are proving to be stronger than we expected in april, helped by increased energy exports. another positive sign is the 11 per cent increase in nominal service exports in the first quarter, which reinforces our view that services will continue to lead export growth, as they have in recent years. similarly, higher prices, on average, for canadian oil