Economics: Further evidence of weaker activity according to September data
Economic indicators released in September confirmed a slowing economy. Inegi’s industrial activity report for July shows the sector’s most pronounced contraction since October 2024, potentially setting the stage for a negative full-year contribution to GDP. Thus, chances for 2025 GDP growth would be left entirely dependent on a tertiary sector that is also showing increasing softness. The most recent reading by the Global Economic Activity Indicator showed a seasonally adjusted -1.2% yoy drop in July, leaving the average increase in the first seven months of the year at 0.3%.
On the demand side, recently released indicators confirmed continuing contractions in consumer spending through July in response to a weakened job market, declining remittance inflows and increasingly downbeat consumer sentiment. In that same month, gross fixed investment sustained its roughly -7.0% average slide so far in 2025. In this context, we anticipate that GDP growth in 2025 will be closer to 0.0-0.5% than to the increase estimated by fiscal authorities (0.5%-1.5%).
Regarding inflation, even as Baxico continues to lower interest rates, the consumer price index increase remains a point of concern as prices were held in check in the first half of September entirely by a 2.11% drop in the non-core component. Core inflation is expected to rise more sharply in the coming months in response to new tariffs on China as the government seeks to align interests with the US and Canada in anticipation of the review and possible renegotiation of the USMCA scheduled for next year. Early in September the Ministry of Finance proposed that Congress raise tariffs by 10-50% on 1,463 products from countries with which Mexico has no free trade agreement, with the biggest share of the effect concentrated in Chinese imports.
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