attentive to incoming data, especially on consumption, which point to a pick - up in growth this quarter. 2 in particular, consumer expenditures rose a strong 0. 6 percent in april, and auto sales edged higher in may. these are encouraging signs, but the data relevant for second - quarter growth are still relatively sparse. in general, demand growth in recent quarters has benefited from a relatively strong household sector – buoyed by a recovering labor market, reduced oil prices, and low interest rates – and has been pulled down by weak business investment and net exports. indeed, consumption and housing investment can more than account for the 2 percent increase in gdp over the past four quarters. by contrast, business investment and net exports together subtracted ¼ percentage point. the rise in the dollar and decline in foreign growth reduced demand for american exports, as well as profits and investment at u. s. firms, which were also adversely affected by declines in the price of oil. over the twelve months ending in april, manufacturing output increased only 0. 4 percent, while total industrial production, which also includes the drilling for, and extraction of, oil and gas, fell 1. 1 percent. although the most recent indicators suggest that weakness in investment and net exports has persisted into the current quarter, if the easing in financial conditions since mid - february and the recent firmness in oil prices were to continue, along with stabilization of the dollar, business investment and exporters would benefit. risks to the outlook of course, there are risks to the projection that future gdp growth will be strong enough to deliver progress on inflation and employment. most immediately, there is important uncertainty surrounding the united kingdom ’ s june 23 “ brexit ” referendum on whether to leave the european union ( eu ). the international monetary fund has noted that a vote in favor of brexit could unsettle financial markets and create a period of uncertainty while the relationship between the united kingdom and the eu is renegotiated. although the economic effects of this uncertainty and the costs of adjusting to altered trade and financial ties are difficult to quantify, we cannot rule out a significant adverse reaction to such an outcome in the near term, such as a substantial jump in financial risk premiums. because international financial markets are growth in gross domestic income ( gdi ) has not slowed as much as gdp growth recently. however, the average of gdp and gdi growth has still slowed recently from an average annual rate of 2 - 1 / 2

percent from the third quarter of 2013 to the third quarter of 2015 to an average of 1 - 1 / 2 percent in the past two quarters. bis central bankers ’ speeches tightly linked, an adverse reaction in european financial markets could affect u. s. financial markets, and, through them, real activity in the united states. in addition, we should not dismiss the possible reemergence of risks surrounding china and emerging market economies ( emes ) more broadly. in recent months, capital outflows in china have moderated as pressures on the exchange rate have eased. should exchange rate pressures reemerge, we cannot rule out a recurrence of financial stress, which would affect not only china but also other emerging markets that are linked to china via supply chains or commodity exports and, ultimately, conditions here. china is making a challenging transition from export - to domestic demand - led growth, and the cost of reallocating resources from excess capacity sectors to more dynamic sectors could further impair growth in the near term. while china has taken policy steps to limit the extent of the slowdown, there is an evident tension in policy between reform and stimulus, and the effect of the stimulus may already be waning. vulnerabilities – such as excess capacity, elevated corporate debt, and risks in the shadow banking sector – appear to be building, and could pose continued risks over the medium term. the fragility of the global economic environment is unlikely to resolve any time soon. growth in the advanced economies remains dependent on extraordinary unconventional monetary policy accommodation, while conventional policy continues to be constrained by the zero lower bound. conventional policy, whose efficacy is more tested and better understood than unconventional policies, can respond readily to upside surprises to demand, but presently would be constrained in adjusting to downside surprises. this asymmetry in the capability of policy effectively skews risks to the outlook to the downside. it also may amplify the sensitivity of exchange rates. indeed, the evidence suggests that over the past year, dollar exchange rate movements have become considerably greater in response to u. s. monetary policy surprises than previously. 3 the evidence that the sensitivity of exchange rate movements has been elevated lately is consistent with recent research suggesting that cross border financial transmission is likely to be amplified at near - zero interest rates where the ability to provide additional support through domestic channels in response to negative shocks may be viewed as limited. 4 in this environment, markets have become quite sensitive to the possibility of a