Promit Mukherjee

OTTAWA, Nov 28 (Reuters) - Canada's economy expanded by 2.6% on an annualized basis in the third quarter, exceeding analysts' expectations, as exports outpaced imports and capital investment was driven by government spending, Statistics Canada data showed on Friday.

Canada's economy grew at a much faster pace than expected in the third quarter as crude oil exports and government spending boosted economic activity, data showed on Friday, even as business investments and household consumption disappointed due to the lingering uncertainty over U.S. tariffs.

Canada and India have agreed to restart stalled talks for a new trade deal, the Indian government said on Sunday, after discussions between the two countries paused following a diplomatic spat two years ago.

Canada's annual inflation rate in October eased to 2.2% as gasoline prices dropped, food prices eased and mortgage interest costs came down below the 3% mark, data showed on Monday.

Ahead of the Bank of Canada's rates decision on October 29, Governing Council decided to look through "choppy" annual inflation data and consider underlying indicators, minutes of the bank's meeting released on Wednesday showed.

Canada's main stock index closed slightly higher on Tuesday as relief over the end of the U.S. government shutdown gave way to caution, with investors signaling they need bigger catalysts to push the market higher.

Canada's job market made a surprise gain in October, reversing past declines, and its unemployment rate fell, data showed on Friday, a bright spot in a country that has suffered from U.S. President Donald Trump's tariffs.

Bank of Canada Governor Tiff Macklem said on Wednesday the proposals in the federal budget to enhance the country's productivity will yield results if they are executed well.

Canada's GDP contracted in August against a consensus estimate of flat growth, data showed on Friday, and an advance estimate suggested the economy might escape a recession in the third quarter.

The Bank of Canada is almost certain to reduce its key policy rate to 2.25% on Wednesday, with President Donald Trump's latest threats of higher tariffs reinforcing expectations that a rate cut would be needed to help spur demand and support growth.

Economists expect the Bank of Canada to make a second consecutive policy rate cut this week due to a slowing economy and high joblessness.

Canada's retail sales rebounded in August as consumers spent more on new cars, at supermarkets and for clothing, data from Canada's national statistics agency showed on Thursday.

Mark Carney said his government's first budget will reduce economic and security reliance on the US.

Canada's annual inflation rate increased to 2.4% in September, mainly led by a smaller decline in gasoline prices on a yearly basis when compared with the previous month and a rise in food prices, data showed on Tuesday.

Canada offered tariff relief on some steel and aluminum products imported from the U.S. and China, a government document showed, in efforts to help domestic businesses battered by a trade war on two fronts.

Canada's economy posted a surprise 60,400 net job gains in September, almost entirely reversing the losses of the previous month, data showed on Friday, though the unemployment rate remained at a multi-year high.

Canada's federal statistics agency said on Thursday it might have to postpone releasing September international trade data next month if the U.S. government shutdown drags on.

Canada's merchandise trade deficit widened in August to C$6.32 billion ($4.53 billion), its second highest on record, as exports both to the U.S. and the rest of the world fell, data showed on Tuesday.

By Promit Mukherjee and David Ljunggren

The Bank of Canada expects to release baseline projections for the economy and inflation with its monetary policy report in October, its summary of deliberations released on Wednesday showed.