Conference Board of Canada downgrades economic outlook

Two men walk past a TD-Canada Trust branch in Toronto. (Chris Young / THE CANADIAN PRESS

OTTAWA -- A new Conference Board of Canada report has downgraded its projections for economic growth in 2016 from 1.6 per cent to 1.4 per cent, despite a strong start to the year.

The think tank says Canada's economic growth advanced at a solid annual pace of 2.4 per cent in the first quarter, driven by robust household spending, a surge in exports and a double-digit increase in residential construction.

But that momentum has largely dissipated after gross domestic product contracted in February and March, followed by wildfires in the Fort McMurray, Alta., region in May and June that shut down many oilsands operations.

The board estimates that the temporary shutdowns will have reduced oil production by 57 million barrels this year, costing oil and gas firms $3.5 billion in lost revenues.

Its report says the largest source of weakness in the economy remains the steep deterioration in business investment due to the collapse in energy spending, and there's still no sign of a long-awaited recovery in non-energy investment.

The board says weaker global economic growth prospects -- factors that hurt Canada's trade sector -- are also dampening the country's outlook.

Its forecast is in line with a report issued earlier this week by the International Monetary Fund, which also cut its prediction for economic growth this year to 1.4 per cent.