The Canadian economy continues to adjust to low commodity prices. The reallocation of investment and employment from the resource sector to the non-resource sector is progressing. Starting in the second half of 2016, real GDP is expected to increase at a rate that exceeds potential growth, driven by solid US domestic demand growth and federal infrastructure spending and other fiscal measures (Table 2). The outlook for real GDP is also supported by accommodative monetary and financial conditions and the past depreciation of the Canadian dollar. While the fundamental elements of the growth projection are similar to those presented in April, the forecast for real GDP growth has been revised down. Downward revisions to investment and exports more than offset the positive economic effects of the recent increase in oil prices. The output gap is expected to close somewhat later than forecast in April, toward the end of 2017. The Bank expects inflation to average close to 2 per cent throughout 2017 as the output gap narrows.