Economics: Demand-side components (consumption and investment) are consistent with first-quarter GDP stagnation
Mexico's economy entered 2026 on a weak footing, with first-quarter GDP virtually stagnant at 0.2% year-on-year growth. While the government has attributed the poor performance primarily to external factors, the data point to significant domestic demand weaknesses running alongside sectoral disruptions from U.S. tariff policy and its impact on the automotive industry.
Private consumption has lost momentum sharply, with growth in domestically produced goods turning negative and household services spending contracting for the first time since early 2021. The headline consumption figures have been sustained almost entirely by a surge in imported goods — likely drawn from previously accumulated inventories — masking the underlying weakness in domestically produced goods.
Formal employment continues to deteriorate, informality is rising, and remittances — when measured in real pesos — are contracting at 16% YoY, eroding the purchasing power of recipient households. Consumer confidence has fallen for sixteen consecutive months, with households showing growing reluctance to spend on durable goods.
Private investment has fared even worse, contracting for eighteen consecutive months. Construction has shown tentative signs of stabilization, but from historically depressed levels, while machinery and equipment investment — particularly in transportation equipment — remains in deep contraction. The structural factors discouraging investment — legal uncertainty, insecurity, and the unresolved USMCA renegotiation — remain firmly in place.
Regarding last week's indicators, data released for March 2026 show that industrial production contracted -0.6% month on month and -1.5% year on year on a seasonally adjusted basis. As a result, industrial activity contracted -1.0% in the first quarter of the year compared to the same period of 2025.
Now read on...
Register to sample a report