BMO Business Outlook: Midwest Companies Put AI, Automation and Capital to Work

• AI and automation shift from pilots to practical deployment as firms seek to extend capacity in a tight labor environment
• Midwest businesses prioritize modernization capex, cash flow and margin resilience over expansion for expansion's sake
• Manufacturing strength and AI-linked infrastructure demand support selective investment and targeted M&A

CHICAGO, MILWAUKEE, MINNEAPOLIS and INDIANAPOLIS, March 18, 2026 /PRNewswire/ - BMO today released its BMO Business Outlook for the Midwest, showing companies across Illinois, Wisconsin, Minnesota and Indiana moving from cautious positioning to deliberate execution as planning visibility improves in the current environment. Across the region, business leaders are prioritizing disciplined capital allocation, operational modernization, and practical AI and automation use cases—especially where labor availability remains a structural constraint.

Rather than pursuing broad-based expansion, many Midwest companies are focusing on modernizing to grow – upgrading equipment, streamlining processes and using technology to do more with existing teams. In manufacturing-heavy markets, the outlook is defined by selective investment: projects that improve throughput, efficiency and resilience are advancing, while spending that doesn't clear high ROI hurdles is being deferred.

A defining theme of the Midwest outlook is that 2026 is shaping up to be a year of execution on AI and automation: companies are moving beyond experimentation toward measurable deployments that improve performance, reduce friction in operations, and free up capacity for higher-value activity.

"Across the Midwest, companies are shifting decisively from planning to execution," said Tony Sciarrino, Head, BMO Commercial Bank, U.S. "In a region defined by manufacturing intensity and tight labor markets, businesses are prioritizing AI, automation and capital discipline to extend capacity, protect margins and stay competitive. The focus isn't on expansion at any cost—it's on putting capital and technology to work in ways that deliver measurable results."

National backdrop: solid supports, uneven conditions—and execution as the differentiator 

BMO's Business Outlook notes the U.S. economy has meaningful supports in 2026, including AI-driven business investment, even as risks remain elevated around trade policy, inflation dynamics and geopolitics. Business leaders report capital markets activity is beginning to thaw unevenly: loan demand is improving as rate cuts work through the system, underwriting remains disciplined, and M&A activity is picking up selectively—especially for bolt-on acquisitions—while broader sponsor-backed activity remains cautious.

"The Midwest enters 2026 with solid fundamentals, but uneven conditions," said Scott Anderson, Chief U.S. Economist, BMO. "Growth is being supported by manufacturing activity and AI‑related investment, while tighter labor supply and lingering trade uncertainty continue to shape decision‑making. In this environment, productivity gains and disciplined capital allocation will be key differentiators for businesses across the region."

Midwest outlook: modernization over expansion 

Across the Midwest, the common thread is modernization: companies are upgrading operations and tightening capital allocation frameworks to compete in a slower-but-manageable cycle. The region's manufacturing base remains a core advantage, while technology adoption—especially automation and applied AI—is increasingly viewed as essential to sustaining output amid ongoing labor constraints.

Market highlights

Illinois
Illinois businesses are converting resilience into opportunity, supported by easing supply-chain pressures and improving confidence in longer-term planning. Activity tied to the expanding data-center ecosystem is supporting infrastructure-related demand, while food manufacturing/distribution remains active and transportation/logistics conditions have stabilized modestly. Even as companies lean forward on investment and strategic repositioning, fiscal and tax considerations remain part of planning. On the economic front, Illinois real GDP grew 2.0% year-over-year in 2025 Q3, with strong contributions from information and finance/insurance—reflecting the state's increasingly technology-driven mix.

Wisconsin
Wisconsin companies enter 2026 from a position of resilience rather than acceleration, focused on stability, productivity and long-term execution amid persistent labor constraints. Many businesses are investing in automation and digital tools to "do more with less," and viewing M&A as a lever to build scale and deepen leadership benches. Wisconsin's economic growth continues to lag the national average—real GDP expanded 1.5% year-over-year in 2025 Q3—while the unemployment rate ended last year at 3.1%, underscoring the structural labor supply challenge shaping investment and operating decisions.

Minnesota
Minnesota firms are approaching the next phase of the cycle with a disciplined, performance-driven mindset—prioritizing cost control, liquidity and execution as growth runs below the national average. Capital spending is re-emerging, driven by modernization needs after deferrals during the inflationary period, but decisions remain highly ROI-driven and phased. Automation and AI-enabled productivity tools are increasingly central, particularly as labor availability remains constrained. Minnesota real GDP rose 1.2% year-over-year in 2025 Q3, and exports fell sharply in 2025 amid trade disruptions—headwinds that many companies are now incorporating into planning rather than treating as episodic shocks.

Indiana
Indiana enters 2026 with strong momentum and a clear competitive edge, supported by a durable manufacturing base, pro-business environment and sustained investment in workforce readiness and infrastructure. Manufacturing remains the cornerstone, with notable strength in chemical and pharmaceutical production. Indiana's real GDP growth has outpaced the national average, including 3.0% year-over-year growth in 2025 Q3, driven in part by a 7.6% year-over-year surge in manufacturing. Companies are pairing productivity-focused expansion with selective M&A to build scale and deepen leadership capacity in a tight hiring environment.

About BMO Financial Group
BMO Financial Group is the eighth largest bank in North America by assets, with total assets of $1.5 trillion as of January 31, 2026. Serving clients for 200 years and counting, BMO is a diverse team of highly engaged employees providing a broad range of personal and commercial banking, wealth management, global markets and investment banking products and services to approximately 13 million clients across Canada, the United States, and in select markets globally. Driven by a single purpose, to Boldly Grow the Good in business and life, BMO is committed to driving positive change in the world, and making progress for a thriving economy, sustainable future, and stronger communities.  

SOURCE BMO Financial Group