OTTAWA, Jan 31 (Reuters) - The Canadian economy outperformed expectations in November with 0.2% growth, and gross domestic product likely expanded in the fourth quarter, data showed on Wednesday, reflecting a rebound in economic activity.
Analysts polled by Reuters had forecast a GDP growth of 0.1% in November from October. The increase in November followed three straight months of essentially zero growth.
In an advance estimate for December, Statistics Canada said the economy likely expanded by 0.3%, translating to a 1.2% annualized growth in the fourth quarter.
The December numbers, if confirmed when final data is released next month, would mean the economy avoided a technical recession - defined as two consecutive quarters of contraction. In the third quarter, Canada's GDP contracted by 1.1%.
The Bank of Canada trimmed its growth forecasts for 2023 and 2024 last week. For the fourth quarter ended in December, the central bank had projected zero growth compared to an earlier forecast for a 0.8% gain.
While the bank does not expect a recession, Governor Tiff Macklem has said small deviations from low growth forecasts could result in small contractions.
The November growth and December's flash estimate show that the central bank's efforts to bring down inflation to its 2% target has managed to keep recession at bay.
The central bank has kept its overnight rate unchanged at 5% for the last five months, but the bank is beginning to shift its focus to when borrowing costs could be lowered rather than whether to hike again.
The rate hikes have helped to bring down inflation from a four-decade high of 8.1% in June 2022 to 3.4% in December, but a return to bank's 2% target is not expected until 2025. The Bank of Canada's next rate announcement is in March.
The growth in November was led by goods-producing industries such as agriculture, mining, and construction. These industries saw the highest growth rate since January 2023, Statscan said.
Canada's goods-producing sector expanded 0.6% on a monthly basis in November, while the service-producing sector grew by 0.1%, the data showed.
Reporting by Promit Mukherjee and Dale Smith in Ottawa; Editing by Ismail Shakil
