(Bloomberg) -- Canada’s economy showed signs of resilience toward the end of the year, potentially bolstering the case for the central bank to continue raising borrowing costs.

Preliminary data suggest gross domestic product expanded 0.1% in November, Statistics Canada reported Friday in Ottawa. That followed a 0.1% gain in October, matching the median estimate in a Bloomberg survey of economists, and an upwardly revised increase of 0.2% in September.

The October and November gains suggest Canada’s growth is holding up better than expected. The economy is on track to expand at an annualized rate of 1.2% in the fourth quarter.

Canada’s benchmark two-year yield ticked higher, rising to 3.894% at 10:51 a.m. Ottawa time, up more than 7 basis points from Thursday’s close.

Economists were expecting a 0.6% expansion in the last three months of 2022, followed by two consecutive quarterly contractions in the first half of next year — a so-called “technical recession.” The Bank of Canada had forecast 0.5% GDP growth in the fourth quarter.

Friday’s report — released two days after inflation data showed underlying price pressures trending higher — potentially dashes hopes for a pause on rates at the central bank’s Jan. 25 decision. The data may prompt Governor Tiff Macklem to stay on a tightening path longer to cool the economy and wrestle inflation back to the 2% target.

“The combination of the upside growth surprises and persistent core inflation has to be causing a degree of discomfort at the Bank of Canada,” Andrew Kelvin and Robert Both, strategists at Toronto-Dominion Bank, wrote in a report to investors.

Earlier this month, policymakers said future hikes would be guided by economic data, and underlying pressures and output numbers will play a key role in determining when interest rates will stop rising. 

Macklem and his officials have already raised borrowing costs by 4 percentage points since March, bringing the benchmark overnight rate to 4.25%. Odds of another 25-basis-point increase next month rose after the GDP release, with overnight swaps traders putting them at just under two-thirds.

In October, growth in services-producing sectors was partially offset by a decline in goods-producing industries.

The public sector, wholesale trade and client-facing sectors led gains in services industries, with wholesale growing 1.3% and the recreation sector expanding 2.2%, up for a ninth straight month.

The oil and gas sector contracted 2%, led by a decrease in oil-sands extraction. Manufacturing dropped 0.7%, the fourth decline in six months and the lowest activity level since December 2021.

(Updates with economist reaction, rate bets.)

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