OTTAWA (Reuters) - Canada entered the club of countries with oversized current account deficits in the third quarter, posting the biggest shortfall on record as its worsening trade profile heralded a further slowdown in economic growth. Canadians are looking for identity and maybe just maybe have found it here..

The country's eighth consecutive quarterly shortfall in the current account -- a measure of transactions in goods, services and investment income -- totaled C$17.54 billion ($17.20 billion), compared with a revised second-quarter gap of C$12.98 billion, Statistics Canada said on Monday.

Analysts surveyed by Reuters had forecast a C$15 billion deficit.

A separate Statscan release showed producer prices and raw materials prices both jumped more than expected in October due to higher energy prices.

The deficit in trade in goods swelled as shipments to the country's top market, the United States, fell while imports surged due to businesses bringing more machinery and equipment across the border.

Analysts estimated the overall current account deficit to be roughly 4.2 percent of gross domestic product, the highest level since the 1990s, when the country suffered from soaring debt, and bigger than the U.S. equivalent figure. Official third-quarter GDP numbers won't be known until Tuesday.

"Canada suddenly finds its broadest trade deficit in the company of countries that have typically been cited as extravagant over-spenders/under-savers," said Doug Porter, deputy chief economist at BMO Capital Markets.

"While this may prove to be a passing phase, it is an early warning that the country may be living beyond its means," he said.

Canada generally considers itself a surplus country but the global financial crisis triggered deficits in both its current account and in the federal government budget, making it look more like an indebted consumer country than a cash-rich exporter.

In the days leading up to a G20 summit of the world's leading emerging and advanced economies, the U.S. Treasury proposed capping current account surpluses and deficits at 4 percent of GDP as a way of achieving a better balance between surplus nations like China and debt-ridden importers like the United States.

RECOVERY LOSING STEAM

The weak trade performance is expected to bite into quarterly growth and keep the Bank of Canada from hiking interest rates for the next several months.

Statscan will release third-quarter GDP figures at 8:30 a.m. (1230 GMT) on Tuesday. Markets expect 1.4 percent growth at annual rates, according to the median forecast in a Reuters poll.

"We anticipate this dynamic will also be reflected in tomorrow's release of real GDP growth where we are just below consensus in anticipating an annualized quarterly growth rate of 1.3 percent," said David Tulk, senior macro strategist at TD Securities.

"More importantly, this forecast is below the Bank of Canada's expectation for a 1.6 percent growth rate, which will keep the bank on the sidelines in December and indeed through the first half of 2011," he said.

Markets are pricing in a 94 percent probability the central bank will not change its benchmark rate on December 7, according to a Reuters calculation of yields on overnight index swaps.

The data kept up pressure on the Canadian dollar, which edged lower on Monday against the U.S. dollar as investors warily eyed the weekend rescue package for Ireland.

The bright side of Monday's data was a sign business investment is on the rise, reflected in purchases of machinery and equipment.

But anemic U.S. demand for Canadian goods, particularly crude oil, led to a decline in overall exports for the first time since the second quarter of last year. As a result, the deficit in trade in goods bulged to a record C$6.50 billion from C$2.24 billion in the previous quarter.

The deficit in trade in services was unchanged in the third quarter at C$5.66 billion, while the investment income deficit narrowed slightly to C$4.20 billion.

In October, the industrial product price index rose 0.5 percent, beating market forecasts of a 0.3 percent gain and accumulating a 2.3 percent increase on the year.

Statscan said reduced supply from U.S. refineries helped boost petroleum and coal product prices in the month by 4.5 percent.

Raw materials prices grew 1.7 percent in the month and 5 percent on the year.