Economic activity in Canada inched ahead by 0.1 per cent in November, as growth remained modest through the autumn, Statistics Canada said Thursday.

Economists had been looking for growth of 0.2 per cent for the month.

The economy grew by 0.2 per cent in October, and by 0.1 per cent in September.

Service industry output rose by 0.2 per cent, but production of goods declined by a similar amount, the federal government agency said.

Retail trade as well as arts and entertainment posted the strongest advances, while the forestry, manufacturing, mining and wholesale trade sectors saw declines.

The hard-hit manufacturing sector saw its output fall 0.3 per cent in November, as it reached its second-lowest level since the start of 2007. During November, the Canadian dollar reached a peak of $1.10 US, making Canadian products more expensive in the U.S. market.

Statistics Canada said production of durable goods fell 0.9 per cent, overshadowing a 0.6 per cent increase in non-durable goods manufacturing.

Retail trade was up 0.4 per cent in the month, propelled by sales at computer, convenience and general merchandise stores.

"This report is consistent with our expectation that fourth-quarter GDP growth will likely slow to an annualized 1.5 per cent compared to the 2.9 per cent gain in the third quarter," said Royal Bank assistant chief economist Paul Ferley.

Further weakening in U.S. growth expected through the first half of this year will likely put additional downward pressure on the pace of activity in Canada, he said

"To limit the extent of any slowing, we expect that the Bank of Canada will continue to cut interest rates," Ferley added.

RBC expects the Bank of Canada to cut the overnight rate by one percentage point to three per cent over the first half of 2008.