Canada’s economy showed signs of resilience toward the end of the year, potentially bolstering the case for the central bank to increase interest rates again.

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Preliminary data suggest gross domestic product expanded 0.1 per cent in November, Statistics Canada reported Friday in Ottawa. That followed a 0.1 per cent gain in October, matching the median estimate in a Bloomberg survey of economists, and an upwardly revised increase of 0.2 per cent in September.

The October and November gains suggest Canada’s growth is holding up better than expected. The economy is on track to expand at an annualized rate of 1.2 per cent in the fourth quarter.

Canada’s benchmark two-year yield ticked higher, rising to 3.893 per cent at 8:35 a.m. Ottawa time, up from about 3.82 per cent at Thursday’s close.

Economists were expecting a 0.6 per cent expansion in the last three months of 2022, followed by two consecutive quarterly contractions in the first half of next year — a so-called “technical recession.” The Bank of Canada had forecast 0.5 per cent GDP growth in the fourth quarter.

Friday’s report — released two days after inflation data showed underlying price pressures trending higher — potentially dashes hopes for a pause on rates at the central bank’s Jan. 25 decision. The data may prompt Governor Tiff Macklem to stay on a tightening path longer to cool the economy and wrestle inflation back to the 2 per cent target.

Earlier this month, policymakers said future hikes would be guided by economic data, and underlying pressures and output numbers will play a key role in determining when interest rates will stop rising.

Macklem and his officials have already raised borrowing costs by 4 percentage points since March, bringing the benchmark overnight rate to 4.25 per cent.

In October, growth in services-producing sectors was partially offset by a decline in goods-producing industries.

The public sector, wholesale trade and client-facing sectors led gains in services industries, with wholesale growing 1.3 per cent and the recreation sector expanding 2.2 per cent, up for a ninth straight month.

The oil and gas sector contracted 2 per cent, led by a decrease in oilsands extraction. Manufacturing dropped 0.7 per cent, the fourth decline in six months and the lowest activity level since December 2021.

Bloomberg.com