TORONTO, June 3, 2026 – Today, the Financial Accountability Office of Ontario (FAO) released a report that provides an overview of the latest trends in the Ontario economy from October 2025 to March 2026.
Ontario’s real Gross Domestic Product (GDP), the broadest measure of economic activity, declined by 0.3% in the fourth quarter of 2025, marking the second decrease in the past three quarters. The decline in real GDP in the fourth quarter reflected a draw-down in inventories and a reduction in residential investment. These declines were partially offset by increases in household and government consumption, government investment and an improvement in net trade.
The latest economic indicators suggest Ontario’s economy was little changed in the first quarter of 2026, with strong gains in retail sales and wholesale trade tempered by employment losses, slower housing market activity, a decline in the net trade of international goods, and lower manufacturing sales.
Looking ahead to the full year, the FAO’s latest Economic and Budget Outlook report, released in February 2026, projected that Ontario’s annual real GDP would rise by 1.4% in 2026, while consumer price inflation was expected to be 2.1%. Recent economic data and global events, including a decline in Ontario’s population and the dramatic increase in the price of oil, have put downside pressure on the FAO’s projection for 2026 real GDP growth, and upside pressure on the FAO’s projection for 2026 consumer price inflation.
To learn more, read the full report here.
Quick Facts:
- Ontario employment dropped by 52,900 jobs (or -0.6%) in 2026 Q1. This marked the steepest quarterly job loss since early 2009, excluding the pandemic.
- Retail sales increased by 1.7% in 2026 Q1 in Ontario, after four quarters of prolonged weakness.
- Ontario home resales in 2026 Q1 totalled 35,800 units, a decrease of 14.9% from the previous quarter. The level of sales in 2026 Q1 was the lowest since early 2009, excluding the pandemic.
- Housing starts in 2026 Q1 totalled 15,600 units in Ontario, a decline of 6.8% from 2025 Q4, following an 11.2% drop in 2025 Q4.
- Wholesale trade, which measures sales of bulk items to retailers and businesses, increased by 2.9% in 2026 Q1, the strongest quarterly increase in over a year.
- Manufacturing sales have struggled over the last several years, declining in six of the past 10 quarters, by a total of 9.0% since mid-2023, reflecting reduced activity in auto assembly for retooling and the impact of US tariffs.
- If an agreement is reached to reopen the Strait of Hormuz, fuel prices in Ontario are expected to decline but remain above pre-Iran war levels through 2026. Under this scenario, the FAO estimates that Ontario would face an additional $8.5 billion in gasoline and diesel costs in 2026. Of this, an estimated $4.1 billion would by paid by households, $4.0 billion by businesses, and $0.4 billion by the government and non-profit sectors. The FAO estimates that higher gasoline and diesel prices would add $648 in additional fuel costs to the average Ontario household in 2026.
- Ontario’s weak population growth could put downward pressure on the FAO’s forecast for economic growth in 2026. Compared to a year earlier, Ontario’s population decreased by 0.2% in 2025 Q4 and by 0.7% in 2026 Q1, marking the first time the province’s population decreased based on records back to 1951.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office of Ontario (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.
Visit our website or follow us on X and LinkedIn for more information on our reports.
-30-
For further information, please contact:
Sophia Zhu l 416 931 5498 l SZhu@fao-on.org l fao-on.org