TORONTO, August 19, 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 January to June 2026.
Ontario’s real Gross Domestic Product (GDP), the broadest measure of economic activity, decreased by 0.1% in the first quarter of 2026, following a 0.3% decline in the fourth quarter of 2025. This means that Ontario experienced a modest technical recession from 2025 Q4 to 2026 Q1. Several challenges have caused Ontario’s economy to struggle over the past year, including the impact of US tariffs, a declining population and elevated geopolitical uncertainty.
However, the latest economic indicators suggest Ontario’s economy advanced strongly in the second quarter of 2026, with notable gains in employment, retail sales, manufacturing sales, wholesale trade and the net trade of international goods.
Looking ahead to the full year, the FAO’s latest economic outlook, released in February 2026, projected that Ontario’s annual real GDP would rise by 1.4% in 2026, while nominal GDP was expected to rise by 3.6%. Recent economic data and global events, including back-to-back quarterly declines in Ontario’s real GDP, a decline in the province’s population, and the dramatic increase in oil prices have put significant downside pressure on the FAO’s projection for 2026 economic growth.
To learn more, read the full report here.
Quick Facts:
- Ontario’s real GDP has declined in three of the last four quarters.
- Ontario employment increased by a significant 61,900 jobs in 2026 Q2, after a decrease of 52,900 jobs in the previous quarter.
- Ontario’s unemployment rate declined by 0.3 percentage points from 7.5% in 2026 Q1 to 7.2% in 2026 Q2, the lowest rate in nearly two years.
- Retail sales increased by 2.5% in 2026 Q2 in Ontario, the second quarterly increase after four quarters of prolonged weakness.
- Manufacturing sales increased by a robust 7.7% in 2026 Q2, following a 1.9% decrease in 2026 Q1.
- Wholesale trade, which measures sales of bulk items to retailers and businesses, increased by 6.4% in 2026 Q2, following a 3.0% increase in the previous quarter.
- International merchandise exports, which accounts for all goods leaving the country through Ontario, increased by 8.5% in 2026 Q2, accelerating from growth of 4.3% in the previous quarter.
- International merchandise imports, which measures international goods entering Ontario, increased by 3.5% in 2026 Q2, after a 5.2% increase in the previous quarter.
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.
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For further information, please contact:
Sophia Zhu | 416 931 5498 | SZhu@fao-on.org | fao-on.org