Canada says U.S. slowdown worse than expected

TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty said on Thursday that the U.S. economic slowdown now appears to be worse than had been expected.

"Other factors we're concerned with, of course, (are) the slowdown in the U.S. and the appearance now that it will likely be longer and deeper than anticipated," he said in a speech in Toronto.

U.S. Treasury Secretary Henry Paulson also noted on Thursday that the U.S. economy had "turned down sharply" and still faced risks from the U.S. housing crash and financial market turmoil.

The U.S. slowdown has hit Canada's export sector hard, while domestic spending has remained robust.

Canada's government downgraded its 2008 domestic economic growth forecast to 1.7 percent in February from October's forecast of 2.4 percent.

The economy grew 0.6 percent in January, partially recovering from a 0.7 percent contraction in December. Gross domestic product grew just 0.8 percent in the fourth quarter of last year on an annualized basis, compared with 3 percent in the third quarter.

(Reporting by Frank Pingue; Editing by Peter Galloway)