Canada's recent economic performance has been impressive. After suffering a less severe recession than most other developed countries, it has also enjoyed a relatively more vigorous recovery. Unfortunately, that out-performance was fuelled almost entirely by the domestic housing boom and the global surge in commodity prices. Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard. Housing valuations have lost all touch with fundamentals and household debt is at a record high. The downturn in the housing sector will severely constrain economic growth over the next couple of years, as consumption expands at a more muted pace and housing investment shrinks.