Mexico Economic Forecast

Revised data put GDP growth at 0.8% quarter on quarter in Q2, down slightly from the preliminary estimate but still robust compared to growth in the years leading up to the pandemic. Construction boomed 6.5%, which could be linked to progress on the government’s large infrastructure projects and nearshoring activity by private firms. In addition, retail, and cultural and recreation activity grew strongly, underpinned by rising remittances inflows, low unemployment and wage growth comfortably outpacing inflation. Turning to Q3, both the manufacturing and non-manufacturing PMIs pointed to improving economic conditions in July–August. In particular, the manufacturing PMI data suggests that Mexico’s industrial sector is outperforming the global average, boosted by nearshoring, fading supply constraints for car manufacturers and solid export demand from the U.S.

Inflation fell to 4.6% in August from July’s 4.8%, the lowest rate since February 2021. Our panelists expect inflation to average slightly above the upper bound of the Central Bank’s 2.0–4.0% target range in H2 and through most of 2024, fueled by robust economic activity, the recent uptick in global oil prices, brisk wage growth and an expected weakening of the peso.