Canada's economic growth was stronger than expected in the third quarter.

Statistics Canada says the national gross domestic product grew at a 2.7 per cent annual rate, two-tenths of a point above estimates.

The pace of growth was the fastest in two years, when the economy expanded by 3.5 per cent. For comparison purposes, the U.S. economy is expanding at a 2.8 per cent annual pace.

The Bank of Canada's most recent forecast expects the economy to grow at an annual pace of 2.3 per cent in the current quarter.

The mining sector was a strong performer, as mining and oil and gas extraction were up 2.2 per cent in the quarter.

There were also gains in the manufacturing, retail, and wholesale trade, finance and insurance sectors. The loonie gained a fifth of a cent to 94.71 cents US following the release of the data.

Inventories piling up

But beneath the positive headline number, there is reason for concern, United Steelworkers economist Erin Weir said, noting that growth in household spending and government consumption grew at a much slower pace.

"A $10-billion investment in inventories accounted for almost all of Canada’s $11-billion of GDP growth in the third quarter," Weir said. "In other words, corporate Canada is storing products it cannot sell because of slowing consumer spending, government austerity and falling exports. This buildup of supply is troubling because, if it continues, companies will cut back production."

For its part, the federal government reacted with cautious optimism to the numbers. In a statement released by his office, Finance Minister Jim Flaherty said the economy "remains on track," pointing out that it was the ninth consecutive positive quarter of growth.

"While this is encouraging news ... we must remember that the global economy remains fragile and that slower global growth will impact Canada," he added.

With files from The Canadian Press