Economic growth moderated in the third quarter as real gross domestic product advanced 0.7%, down from 0.9 in the second quarter, Statistics Canada reported today.

Economic output was up 0.1% in September, after increasing 0.2% in August and 0.1 in July. Final domestic demand remained buoyant at 1.1%, outpacing GDP for the 11th quarter in the past 12.

The Canadian economy grew at an annualized rate of 2.9% in the third quarter, compared with U.S. economic growth of 4.9%.

Consumer spending eased in the third quarter from its robust showing in the second, while retailers and wholesalers added significantly to their inventories.

Imports outpaced exports by a wide margin, as the Canadian dollar appreciated 5.1% against the U.S. greenback.

StatsCan said businesses took advantage of lower prices to invest heavily in machinery and equipment.

Housing investment remained strong, propelled by new home construction, while the resale market retreated.

Service industries output expanded 0.9% in the third quarter, while the production of the goods industries contracted 0.1.

Significant growth was recorded in wholesale trade, while finance and insurance, construction, mining, and accommodation and food services also contributed to the overall increase.

These gains were partly offset by declines in manufacturing, utilities, and forestry and logging.

Labour income grew at a slower pace than in the first half of 2007, while personal disposable income was up moderately. Corporate profits advanced on strong bank earnings.

Industrial production (the output of utilities, mines and factories) slipped 0.4% in the third quarter as utilities and manufacturing both declined.

Mining moved forward as a result of the increase in oil-and-gas exploration and metal ore mining.