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Bank of Canada governor Stephen Poloz listens during a press conference in Ottawa, July 13, 2016. Poloz held the benchmark interest rate at 0.5 percent in a rate decision that argued fundamentals remain in place for faster growth.

David Kawai/Bloomberg

Stephen Poloz is usually a pretty easy-going guy, at least as far as central bank bosses go. So when he gets his back up a little in a press conference, you've got to take notice of the exposed nerve that's just been hit.

"We resist the idea of turning 180 degrees on our forecast because of the last few data points," the Bank of Canada Governor said in response to a question about why he remains so optimistic about Canada's non-energy exports in the face of a four-month run of pretty miserable trade data that has tested the faith of others in this critical ingredient for the country's economic recovery.

It wasn't even the first question along those lines. Despite a significant cut in the Bank of Canada's 2016 growth forecast in Wednesday's quarterly Monetary Policy Report (MPR), the bank remains unshaken in its belief that the economy's "complex adjustment" to the oil shock is intact – a tone of confidence that surprised not just some of the reporters who cover the central bank, but more than a few economists, too. The bank has long predicted that growth in non-energy exports would eventually supplant the slump in the energy sector and take over as the primary driver of the economic story, and the disquieting backtracking of those exports in recent months has done little to soften that view, let alone change it.

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Up to a point, the bank makes a good case. During the press conference, Mr. Poloz and his second-in-command, Carolyn Wilkins, pointed – three times, no less – to a chart in the MPR showing the impressive upward trend of non-commodity exports over the past several years. On that chart, the weakness of the past few months looks very much like a tiny blip in exports that are tracking near their prerecession peaks. And they argued that the U.S. economy still looks on course for strong growth; it's just that recently that growth has been driven more by the consumer (less a focus of Canadian non-energy exports) and less by business spending (much more a driver of demand for the non-energy sector). So, it's a temporary lull, not a downturn.

Fair enough. But by the same token, the bank acknowledged that a big engine for the rapid growth in those exports – the weaker Canadian dollar – has pretty much run its course. "The past depreciation of the exchange rate will continue to support the level of exports, but its effect on export growth is projected to taper off over the course of this year," Ms. Wilkins said in a statement to open the press conference.

The key from here, then, is the next logical consequence of that export strength, the next necessary step in the economy's rotation away from the slumping energy sector and toward the growing non-commodity sectors. That would be a burst of non-energy business investment in response to sustained strong export demand. That's critical to start filling the immense loss of investment from the energy sector. In a very real way, non-energy investment completes the puzzle for the economic recovery.

But this is where the bank's story faces a gaping hole, and much to its chagrin, it knows it. The boom in non-commodity exports hasn't translated into investment. Indeed, the stubborn lack of business spending was a key reason why the bank was forced to cut in its 2016 economic growth forecast.

And looking at the central bank's own Business Outlook Survey, released just last week, it's hard to argue that we're on the cusp of some sort of investment breakout. "While firms judge that the boost to their sales from U.S. growth is lending support to their investment plans, investment intentions are modest for exporters, even those unaffected by commodity prices," the survey report said.

Many observers believe the big impediment is confidence – which never fully recovered from the seismic shift it suffered in the 2008-09 financial crisis, and has been repeatedly shaken through the long recovery that has come with more than the usual share of false starts and disappointments. The recent backslide in exports is a recent case in point. And the Brexit vote in Britain has tossed another heap of uncertainty into the investment environment for businesses globally – something that many Canadian exporters that play a part in the global supply chain will find it hard to avoid.

Still, there are some hints elsewhere that offer hope for a pickup in business investment. The pace of Canadian net new-firm formation, often a precursor of a rise in investment, hit a nine-year high in the first quarter of this year, despite a slump in the firm count in the energy and mining sectors. Business formation in the United States has also accelerated to near its prerecession levels – which bodes well for the kind of U.S. business investment that could fuel demand for Canadian exports and give exporters further impetus to spend on expansion.

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But the big question, as Ms. Wilkins acknowledged, is "when and by how much?" The success of Canada's difficult economic rebuild lies in the balance. And while the Bank of Canada keeps the faith, it doesn't have the answer.

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