Canada's economy expands by 1% in Q3, growth likely to be 0.1% in October

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Q3 growth led by household, government spending

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On a monthly basis, GDP grew by 0.1% in September

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Growth seen at 0.1% in October, Statscan said

OTTAWA, Nov 29 (Reuters) - Canada's economy grew as expected at an annualized rate of 1% in the third quarter, according to data released on Friday, helped by household and government spending and partly offset by lower business investments and exports.

On a monthly basis, however, the Gross Domestic Product came below expectations at 0.1%, Statistics Canada data showed, and according to its preliminary estimate growth was likely to be 0.1% in October.

Analysts had expected the third quarter annualized growth to be around the same level and had predicted month-on-month GDP growth in September at 0.3%.

The statistics agency revised the second quarter annualized growth to 2.2% from 2.1%.

The GDP data as well as an employment report due early next month will help the Bank of Canada determine the size of an expected rate cut at its last monetary policy decision of the year on Dec. 11.

The employment report will be the last major economic data before the bank's monetary policy decision.

Household spending grew by 0.9% and was one of the main drivers of the growth along with continued government expenditures, Statscan said.

"Per capita household expenditures edged up 0.2% in the third quarter, after falling in six of the last eight quarters," it said.

The BoC has reduced borrowing costs by 125 basis points in its past four meetings to 3.75% as inflation has cooled and the bank turned its focus towards boosting growth.

Currency markets are pricing in almost 27% chance of a 50 basis point rate cut on Dec 11. A 25 basis point rate reduction is all but certain.

The third quarter growth fell short of the BoC's own 1.5% projection and is the second time its Q3 estimate from its last two monetary policy reports will be missed, as growth continued to be uninspiring after four rounds of rate cut.

Economists have said that Canada would have slipped into recession, like a few of its G7 counterparts, if not for a regular government spending and historic surge in population this year that has propped up demand.

On a per person basis, the size of Canada's GDP has shrunk by 0.4% in the third quarter, its sixth consecutive quarterly decline, Statscan said. (Reporting by Promit Mukherjee; Editing by Dale Smith)