BMO Business Outlook: Southwest Companies Lean on Technology and Execution as Growth Normalizes in 2026

• Technology and AI investment remain important growth drivers, though hiring and expansion have moderated across the Southwest
• Businesses emphasize execution, efficiency and balance‑sheet strength as conditions normalize
• Selective capital deployment replaces rapid post‑pandemic expansion across Southwest markets 

DALLAS and DENVER and PHOENIX and SALT LAKE CITY, March 18, 2026 /PRNewswire/ - BMO today released its BMO Business Outlook for the Southwest, showing companies across Arizona, Colorado, Texas, and Utah shifting from rapid post‑pandemic expansion to a more measured, execution‑focused phase as growth normalizes and planning visibility improves.

Across the Southwest, business leaders are emphasizing disciplined capital allocation, margin protection and practical technology deployment to sustain competitiveness in a slower—but still constructive—operating environment. While innovation and long‑term demographic trends remain supportive in select markets, companies are increasingly focused on execution, efficiency and balance‑sheet strength rather than broad expansion.

Rather than pulling back, many Southwest‑based companies are recalibrating—tightening capital frameworks, extending productivity through automation and data tools, and preserving flexibility as labor markets cool from prior highs and financing conditions remain selective.

A defining theme of the Southwest outlook is that 2026 is shaping up to be a year of disciplined execution. Businesses are moving beyond aspirational technology spending toward practical AI and automation use cases that improve efficiency, support decision‑making and protect margins in a more normalized growth environment.

"Across the Southwest, companies are adapting to a more balanced and deliberate phase of the cycle," said Tony Sciarrino, Head, BMO Commercial Bank, U.S. "AI and technology remain important growth enablers, but success is increasingly coming from disciplined execution—deploying capital carefully, managing costs and using technology to operate more efficiently rather than simply expanding headcount."

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. Capital markets activity is beginning to thaw unevenly, with improving loan demand, disciplined underwriting and selective M&A—particularly bolt‑on transactions—while broader sponsor activity remains cautious.

"Southwest markets reflect the broader U.S. transition toward normalization," said Scott Anderson, Chief U.S. Economist, BMO. "Growth remains supported by technology, innovation and long‑term demographic trends in some states, but slower hiring and affordability constraints are reinforcing the importance of productivity and disciplined capital allocation across the region."

Southwest outlook

Arizona
Arizona has transitioned from rapid post‑pandemic expansion to a more measured growth phase. Slower job growth, rising unemployment and a cooling housing market have tempered momentum, while underlying fundamentals remain intact. Advanced manufacturing and semiconductors continue to anchor the state's long‑term outlook, supported by reshoring and federal investment, even as businesses emphasize balance‑sheet strength, efficiency and selective investment over large, front‑loaded commitments.

Colorado
Colorado's business environment is defined by durability rather than acceleration. Growth has cooled to a more sustainable pace, with companies focusing on margins, cash flow and capital efficiency as income growth and housing affordability remain constrained. Technology, energy, aerospace and advanced manufacturing continue to benefit from long‑term investment trends, while businesses increasingly favor phased investments and practical technology deployment to manage labor constraints and protect profitability.

Texas
Texas continues to stand out within the Southwest, supported by population growth, economic diversification and sustained business investment. Energy, industrials, technology infrastructure and financial services remain key drivers, while consolidation accelerates as companies pursue scale to protect margins and enhance competitive positioning. Working‑capital optimization has become a central focus as inventory cycles lengthen and cost pressures persist, reinforcing disciplined execution even as opportunity remains abundant.

Utah
Utah continues to stand out for long‑term strength, supported by a young, educated workforce and a deeply entrepreneurial culture, even as growth moderates from historic highs. Businesses remain constructive but more selective, emphasizing capital discipline, productivity and leadership development over rapid expansion. Investment in software, automation and AI remains widespread as companies seek to support growth without over‑hiring in a still‑tight labor market.

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