Ontario Economic Outlook

Highlights

• Ontario’s economy is expected to grow by 1.4% in 2026, up from 1.1% in 2025, supported by scaled-back trade barriers, lower interest rates and federal spending. But this will play out differently across the province. Our analysis suggests that mining and private services are likely to be tailwinds to growth, while manufacturing and public services could face material headwinds.
• Ontario’s auto sector is facing steep US tariffs and uncertainty around the upcoming Canada–United States–Mexico Agreement (CUSMA) review. This has impacted cities such as Windsor, where the unemployment rate has hovered around 10% for most of the year. The province’s remaining manufacturing industries are more insulated from tariffs but have not been immune from ongoing trade disruptions. This headwind is expected to persist into next year.
• Ontario’s steel industry has also been hard hit by US tariffs, with Hamilton bearing the brunt, as it accounted for 60% of Canada’s steel output last year. Sault Ste. Marie in Northern Ontario, home of Algoma steel, has also been impacted.
• Mining has been a standout performer among Ontario industries, with gold prices at record highs and critical mineral projects advancing. This strength has translated into hiring, elevated job vacancies and higher wages, particularly in the North.
• Toronto’s diversified economy has cushioned it from trade shocks, with financial and professional services leading activity. However, given the city’s reliance on global talent, tighter national immigration targets pose headwinds by constraining labour supply and dampening consumer spending, even as they ease pressure on housing.
• Ottawa has another set of problems. Federal payrolls have already been trending lower, and recent announcements of public service cuts should accelerate job losses. Job creation in its thriving tech sector won’t likely be enough to offset the losses.