Canadian corporate profits are expected to weaken over the next six months, according to a report issued Tuesday.

The Conference Board of Canada said its leading indicator of industry profitability fell 0.1 per cent in July, after staying flat the previous two months.

That’s its first drop since August, 2010.

The independent research think-tank said nearly half of industries covered, 18 out of 49, recorded a drop in July — the highest number since the fall of 2009.

“This suggests that Canadian corporate profitability may experience a downturn over the next six months,” Conference Board economist Lin Ai said.

“The dismal economic recovery south of the border has taken the strength out of the Canadian economy.”

Manufacturing, insurance, real estate, agriculture, forestry and mining sectors are dealing with falling stock markets, slower consumer spending, and the effects of poor weather.

The poor economic recovery in the U.S., supply-chain disruptions due to the Japanese earthquake and tsunami, and rising inflation are also pulling down the outlook.

The predictions are based on data from before the turmoil on the global stock market began earlier this month, the Conference Board said.

“Some of these factors may prove temporary, such as the effects of wildfires and volatility in financial markets, but the economic problems of Canada’s trading partners in Europe and the U.S. are having real implications for Canadian businesses,” Ai said.

Consumer confidence also dropped for the third straight month in July, a recent report from the Conference Board showed. Close to half of respondents said this was not a good time to make a major purchase.

Small- and medium-sized business owners are also feeling more pessimistic. The Canadian Federation of Independent Business’s small-business barometer slipped in May and June, although it did post a small improvement in July, the conference board noted in its report.

“If business owners feel less confident about the performance of their businesses, they may boost cash reserves and limit discretionary spending,” Ai said.