Canada's economy saw slower than expected 1.7 percent growth in the first quarter, government data showed Friday, adding to expectations of a central bank cut in interest rates.

Higher household spending on services, up 0.7 percent, led the growth in GDP, while slower inventory increases moderated overall growth, the government statistics agency said.

The biggest factor in the household spending boost was a 1.1 percent rise on services, primarily telecoms services, rent and air transport.

"Businesses continued to add to their non-farm inventories," but "accumulations eased in most industries in the first quarter of 2024," the agency said.

The Bank of Canada has forecast modest economic growth in 2024.

The central bank has been widely expected to cut interest rates as early as June after having hiked rates aggressively in an effort to tame inflation.