The Canadian economy has skirted a recession so far this year as Statistics Canada reported Friday that gross domestic product grew at a weak annualized rate of 0.3 per cent in the second quarter of this year.

The federal government agency said Friday that it has also revised the first quarter annualized rate from its initial estimate of -0.3 per cent down to -0.8 per cent.

That means the country has avoided a recession — at least using the common definition of two consecutive quarters of economic contraction.

Private sector economists had been looking for annualized second-quarter growth of 0.6 per cent.

The Bank of Canada forecast in July that the country's economy would grow at a 0.8 per cent annual pace in the second quarter, but earlier this week a deputy governor said the central bank may have been too optimistic in its outlook.

Statistics Canada said Canadian consumer demand grew by 0.5 per cent in the quarter, but foreign demand for Canadian goods and services fell for a fourth consecutive quarter.

The volume of exports of goods and services fell 1.5 per cent in the second quarter, leaving their level 4.7 per cent lower than in the second quarter of 2007. The decline in the second quarter of 2008 was widespread, as international sales of forestry products, machinery and equipment, and automotive products continued to fall, partly due to weaker U.S. spending on these goods.

The volume of Canadian energy exports for the second quarter decreased 3.7 per cent, following a jump in the first three months of the year.

Consumer spending grew by 0.6 per cent, although that was slower than the first quarter's 1.8 per cent.

Finance Minister Jim Flaherty told reporters in Toronto that the country is facing economic challenges.

"Canadians understand that Canada is not an island. This is a global phenomenon, the global economy is slowing," he said.

"Canada is in a better position than most to weather this period of global economic uncertainty. Canada's economic fundamentals remain solid," he added.

Economists said the report may prod the Bank of Canada off the sidelines to make cuts to interest rates to spur the economy.

"Today's report confirmed that the economy grew at a mild pace in the second quarter, marking an improvement over the first quarter but still indicating limited momentum in the pace of activity," said Royal Bank assistant chief economist Dawn Desjardins.

"The slump in employment in July, moderating housing market activity and indications that growth in the U.S. economy may have already hit this year's high-water mark will leave the Bank of Canada with concerns about the downside risk to their projection that the economy will grow at about a 1.5 per cent pace over the second half of this year," Desjardins said.