Canada's economy grew at an annualized rate of two percent in the second quarter, slowing dramatically from the 5.8 percent posted in the first three months of the year, official data showed Tuesday. Gross domestic product was slightly weaker than the 2.5 percent growth analysts had forecast for the second quarter and a full point less than the Bank of Canada's latest projection. While the data may tarnish Canada's image as a model for economic recovery, it should not necessarily cause too much gloom, observers said. 'Canada's economy is slowing, but only slowly,' CIBC economist Avery Shenfeld told clients. 'Canadian households got a bit more cautious, businesses a bit less so.' But it does not amount to the 'double-dip recession' some had feared could emerge, TD economist Pascal Gauthier told selfnews. 'There was no single big surprise to explain the softer-than-expected result, just a bunch of somewhat sub-par results,' commented BMO analyst Douglas Porter. 'Consumer spending was OK, and business investment was robust, but government spending was a tad light, as was housing,' he said. Due to its relatively strong economic performance, Canada remains the only industrialized nation to have raised interest rates after the crippling global recession of 2008. This new economic slowdown is likely to add pressure on the Bank of Canada to slow its gradual hike of lending rates, started in June with a small jump from a historic low and again in July to 0.75 percent. Another rate hike is still possible at the central bank's next monetary policy meeting on September 8, most analysts agree, but it would likely be its last for several months afterward. 'We've passed to a second stage of the recovery,' Gauthier said. 'Following an initial strong rebound, we're now seeing weaker, but more sustainable growth,' he said, projecting 2.0 percent to 2.5 percent growth in the latter half of this year. Statistics Canada said the second-quarter increase in gross domestic product was led by the mining sector. Manufacturing also contributed to this gain, as did the banking sector and the public sector (health, education, and public administration), the government agency said. Consumer expenditures and business investment on residential buildings grew at a slower rate than in the first quarter. Declines in the home resale market and in retail and wholesale trade also contributed to the slower growth. Goods-producing industries saw their output rise 1.9 percent, while the service sector edged up 0.1 percent, marking 'the third consecutive quarter in which the output of the goods-producing industries has significantly outpaced that of the services industries,' Statistics Canada noted. CIBC's Shenfeld said the impact of low interest rates in drawing forward purchases of cars and houses 'may have peaked,' while home renovation activity 'is slowing with the expiry of tax incentives.' 'Canadians might also have been spooked a bit by downbeat talk about what lies ahead,' he said. Corporate Canada, despite seeing a quarterly profit decline in part tied to weaker commodity prices, 'showed much greater optimism, but to less overall benefit in terms of domestic activity,' he added. 