The Canadian economy is adjusting to the fall in commodity prices, energy in particular. Business investment has fallen sharply in the energy sector, and employment has declined in oil-producing provinces. These factors, together with the loss of income from the fall in the terms of trade, temporarily depressed economic growth in 2015.Output has fallen sharply in industries most affected by commodity prices but has risen in the rest of the economy, especially in export-related industries, allowing new job creation to re-employ displaced workers. Exchange rate depreciation, Canada's flexible labour markets and monetary and fiscal policy are supporting the shift towards non-resource production. Low interest rates have encouraged further increases in household credit, with household debt continuing to edge up from already high levels. Canadian house prices have risen sharply, especially in Vancouver and Toronto, and housing investment is unusually high as a share of GDP, posing vulnerabilities and squeezing middle-class families in these high-priced markets. In response to these developments, the authorities have deployed some targeted macro-prudential measures, but further regionally focused measures should be considered. Productivity has grown more slowly than in the best performing comparable OECD countries in recent decades, holding back living standards and well-being. This weakness in productivity growth is broad based. There are several potential explanations, although it is difficult to identify the most important. Among them are high barriers to competition in network sectors which impede innovation and productivity growth. Interprovincial non-tariff barriers hamper efficiency, particularly by reducing the scale of production. Improved small business dynamism, with higher start-up rates and strengthened "up-or-out dynamics", would speed the reallocation of resources to more productive firms and the diffusion of new technologies, raisingproductivity