September 28, 2018 / 12:42 PM / 18 days ago

UPDATE 1-Canada GDP shows unexpected strength, set to boost rate hike chances

(Adds details of release, background)

OTTAWA, Sept 28 (Reuters) - Canada’s economy grew by a greater than expected 0.2 percent in July, Statistics Canada data indicated on Friday, a development set to cement market expectations of another interest rate increase next month.

Analysts in a Reuters poll had forecast 0.1 percent growth from June. Twelve of the 20 sectors gained, led by manufacturing, wholesale trade and utilities.

The Bank of Canada, which this month forecast temporary factors would weigh on third-quarter GDP, on Thursday pledged to raise rates gradually and keep a close watch on economic data. The next fixed interest rate decision is on Oct 24.

The manufacturing sector increased by 1.2 percent as key sectors recovered after shutdowns for maintenance and retooling. Output of petroleum and coal products climbed by 7.6 percent while chemical products posted a 5.5 percent gain.

Wholesale trade grew by 1.4 percent after a 1.2 percent decline in June. The utilities sector expanded by 2.1 percent as a heat wave boosted demand for electric power generation and distribution.

Reporting by David Ljunggren Editing by Bill Trott

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