The latest BMO Business Outlook for California and the Pacific Northwest, shows that companies in the region are transitioning from caution to selective execution as planning visibility increases, even as economic conditions remain highly uneven across the region and sector.
On the other side of the Pacific, business leaders across the region are focusing on disciplined capital allocation, liquidity management and practical AI deployment to enhance competitiveness. Even as AI-related investment and infrastructure spending continue to fuel growth, especially in Northern California and parts of the Pacific Northwest, benefits are not filtering down evenly into labour markets. This further highlights a focus on productivity, efficiency and resilience over expansion for its own sake.
Many Pacific-region businesses are focusing on focused, high-return initiatives, modernising operations, deploying AI selectively, and tightening capital frameworks to manage labour constraints, affordability pressures, and still-selective credit conditions, instead of pursuing broad-based growth.
Execution is increasingly determined by where businesses invest rather than how quickly they expand. The Pacific outlook’s central idea is that 2026 will likely be a year of capital discipline and AI execution.
Businesses are transitioning from experimentation to quantifiable AI deployments that enhance forecasting, optimise workflows, and facilitate operational flexibility while combining technology adoption with cautious change management.
“Across the Pacific, companies are being highly selective and intentional about where they deploy capital. AI investment remains a powerful tailwind, but success is coming from disciplined execution—pairing technology with strong liquidity, margin focus and realistic growth expectations in an uneven operating environment,” Tony Sciarrino, Head, BMO Commercial Bank, US, said.
BMO Business Outlook notes the world’s largest economy has meaningful support 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.
“AI-related investment remains a key growth tailwind, but the environment still requires careful navigation. Productivity and execution will be critical differentiators, especially as businesses balance opportunities created by technology with ongoing uncertainty across trade and inflation,” said Scott Anderson, BMO’s Chief US Economist.