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BMO's 2026 Business Outlook: AI and Automation in the Midwest

BMO Financial Group has unveiled its Business Outlook for 2026, indicating a significant shift among companies in the Midwest. States like Illinois, Wisconsin, Minnesota, and Indiana are evolving from a phase of cautious planning to one driven by concrete execution. This transition comes as business leaders have improved visibility in their operational environments, prompting a focus on disciplined capital allocation, operational modernization, and practical applications of artificial intelligence (AI) and automation.

Emphasizing Modernization Over Expansion

Rather than opting for broad-based expansion strategies, many Midwest firms are honing in on modernization as a means for growth. This includes enhancing equipment, streamlining workflows, and leveraging technology to maximize output from existing teams. The manufacturing sector plays a significant role here, with targeted investments aimed at boosting throughput, efficiency, and resilience in operations. Investments that do not meet stringent return on investment (ROI) criteria are being postponed, making way for efforts that promise tangible benefits.

In 2026, a prevailing theme is the definitive move from experimentation in AI and automation to their measurable deployment. Companies are increasingly adopting these technologies to enhance operational performance, reduce friction, and enable workforce members to engage in higher-value activities. Tony Sciarrino, Head of BMO Commercial Bank in the U.S., noted, “Across the Midwest, companies are decisively moving from planning to execution.”

This proactive approach aims to safeguard profit margins and extend operational capacity, ensuring competitiveness in an environment characterized by labor shortages.

National Conditions Affecting Regional Dynamics

The BMO Business Outlook highlights that while the U.S. economy has several supports in place for 2026—particularly AI-driven business investments—there are still significant risks surrounding trade policy, inflation, and geopolitical concerns. Business leaders report that capital market activities are gradually improving, although unevenly. Loan demand is recovering, following rate cuts, and there is a selective increase in mergers and acquisitions (M&A) activity, especially amongst bolt-on acquisitions. However, broader acquisition activities remain cautious.

Chief U.S. Economist Scott Anderson provided insights into the complex dynamics at play: “The Midwest enters 2026 with solid fundamentals, but uneven conditions.” He emphasized that while manufacturing and AI-related investments drive growth, the ongoing labor supply challenges and trade uncertainties greatly influence decision-making processes.

Insights by State

Illinois

Illinois businesses are strategically converting resilience into opportunity. Easing supply-chain issues and growing confidence regarding long-term plans are driving investment in infrastructure. The food manufacturing and distribution sectors remain robust, while improved transportation and logistics conditions contribute to overall market stability. By Q3 of 2025, Illinois experienced a 2.0% year-over-year increase in real GDP, driven primarily by advancements in the technology sector.

Wisconsin

For Wisconsin, the emphasis for 2026 lies in resilience rather than acceleration, focusing on maintaining stability and enhancing productivity amid persistent labor restrictions. Companies are heavily investing in automation and digital tools to maximize output with limited resources, viewing M&A as a critical strategy for scaling operations. Wisconsin’s real GDP saw a modest expansion of 1.5% in Q3 of 2025, with the unemployment rate hovering around 3.1%.

Minnesota

Minnesota organizations are approaching the business cycle with a disciplined mindset, prioritizing cost control and operational execution. The need for modernization has prompted renewed capital spending, although decisions are being made with strict ROI focus. Like their counterparts, Minnesota firms are increasingly relying on automation and AI tools due to scarce labor resources. The state's real GDP increased by 1.2% year-over-year as of Q3 2025.

Indiana

Indiana boasts a strong manufacturing base and advantages from a pro-business environment. The state has seen significant GDP growth, notably 3.0% year-over-year in Q3 2025, fueled by a 7.6% rise in manufacturing. Indiana's workforce development and infrastructure investments further bolster its competitive edge.

Conclusion

BMO Financial Group represents one of North America’s largest banking entities. As it continues to shape strategies for clients within the Midwest, its emphasis on innovative solutions like AI and automation coupled with robust capital discipline suggests a forward-thinking approach. As these trends evolve, we can expect the Midwest to emerge as a resilient player in the national economy with a commitment to sustainable growth and technological advancement.