). the slower - than - expected headline gdp growth number was largely due to higher imports, while exports made only a partial recovery from their third - quarter decline. the gain in imports mainly reflected stronger business investment, which adds to the economy ’ s capacity. there were also some temporary factors influencing imports in the fourth quarter. in addition, housing and government spending contributed more than expected to economic growth. on that note, we ’ ll incorporate the implications of the recent federal budget for the outlook for growth and inflation in the bank ’ s april projection. all that said, uncertainty about the north american free trade agreement ( nafta ) and growing global trade tensions will need to be watched, for their possible impact on the outlook. recent developments with respect to steel and aluminum, alongside increased protectionist rhetoric, carry potentially serious consequences. we do not know how or when the nafta talks or other trade disputes will conclude, and we do not know how industries, or governments, will react. the range of possibilities is wide, which means that trying to quantify any scenario in advance would not be useful for monetary policy purposes. for now, our working assumption is that existing trade arrangements will stay in place over our current two - year projection horizon. as and when concrete outcomes emerge, we will be in a better position to assess their impact on the canadian economy. but even with no changes in our trading arrangements, the uncertainty around them is affecting business investment decisions. the us tax reforms may further reduce the relative attractiveness of investing in canada. for both these reasons, firms may decide to redirect some of their planned investment spending from canada to the united states. our economic projections have been incorporating the judgment that such effects are likely to dampen business investment — as discussed in january. as we prepare our april forecast, we ’ ll assess whether the degree of caution we ’ ve applied is still appropriate. an important indicator will be our spring business outlook survey ( bos ), which we will publish on april 9. 4 / 9 bis central bankers'speeches there are a couple of additional points to note on the export and investment picture. first, with respect to energy exports, spot prices for crude oil have fallen since we published our january forecast, but remain relatively high compared with 2017 ( chart 3 ). however, canada is not seeing the full benefit of oil ’ s recovery because of wider - than - average differences between benchmark global oil prices and prices for canadian heavy oil. to the

us yield curve as a sign of trouble ahead. while there are downside risks to any outlook, governing council prefers to look at a broader range of indicators. for one thing, the yield curve is not currently inverted, and is therefore not pointing to significant slowing. 12 besides that, the shape of the curve may not be a reliable signal in the current environment anyway. this is because longer - dated bond yields are being see e. engstrom and s. sharpe. “ ( don ’ t fear ) the yield curve, ” feds notes. washington : board of governors of the federal reserve system ( june 28, 2018 ). - 8distorted by a combination of central bank quantitative easing programs and strong private demand for long - dated safe assets. other indicators to look at include credit spreads, which remain narrow. 13 there may be some downside risk to our july outlook for the global economy coming from trade tensions, and cracks have appeared in certain emerging economies with financial vulnerabilities, but with limited spillovers to other countries. conclusion it is time for me to conclude. in terms of momentum in canada, we are encouraged that the economy is adjusting well to higher borrowing rates and tighter guidelines for mortgage financing. we are also pleased with the continued shift in the composition of growth toward exports and business investment. recent data reinforce governing council ’ s assessment that higher interest rates will be warranted to achieve the inflation target. we will continue to take a gradual approach, guided by incoming data. in particular, the bank continues to gauge the economy ’ s reaction to higher interest rates. the bank is also monitoring closely the course of nafta negotiations and other trade policy developments, and their impact on the inflation outlook. see m. leboeuf and d. hyun, “ is the excess bond premium a leading indicator of canadian economic activity? ” bank of canada staff analytical note no. 2018 - 4 ( march 2018 ).