Introduction
On the previous day, Mexico’s National Institute of Statistics and Geography (Inegi) announced that the Indicador Global de la Actividad Económica (IGAE) grew by 1.7% annually in October. While the figure seems positive, it masks more than it reveals, as is often the case with averages. Upon closer examination, it becomes evident that Mexico’s economy is not growing uniformly.
Asymmetric Growth: Primary Sector Outperforms
The October advance was clearly asymmetrical. The primary sector experienced an extraordinary surge of 12.4%, an unusual performance that accounts for a significant portion of the overall growth. Agriculture and livestock benefited from the normalization of rainfall cycles and favorable harvests, offsetting previous months of severe drought. This statistical relief also serves as a reminder of their climate dependency.
The tertiary sector grew by 2.4%. Retail and services continue to act as shock absorbers, with internal consumption remaining resilient and remittances bolstering demand.
The Red Flag: Secundary Sector Stagnates
However, the secondary sector—comprising industry, manufacturing, and construction—contracted by -0.4% annually. While there might be signs of stability in monthly margins, the annual data is clear: industry does not contribute to growth. Consequently, investment, formal employment, and productivity are affected.
The issue is structural. The fastest-growing sector is the smallest. The primary sector accounts for approximately 3.6% of GDP; the secondary, 31.9%; and the tertiary, 64.5%. In October, the smallest sector compensated for almost a third of the productive structure’s stagnation. The average remains stable, but the foundation is fragile.
Fiscal Implications
This uneven growth has clear fiscal implications. The primary sector, by design, generates minimal revenue due to the predominance of the 0% VAT rate and specific ISR regimes. Consequently, its contribution is marginal. The tertiary sector, however, significantly impacts public finances, as retail and services concentrate the majority of tax revenue, with estimates exceeding 60% of ISR and nearly three-quarters of VAT.
Industry is crucial as a significant contributor and part of the value chain. When it contracts, the tax base weakens. This helps explain the tightened fiscalization of large corporations—an administrative response to an economy growing where it raises the least.
Labor Market Dynamics
The labor market reinforces this interpretation. The dynamism of the primary sector coexists with informality levels near 88%. There is activity, but not necessarily formal employment or benefits. Moreover, December tends to inflate the picture: real adjustments typically occur in January when between 200,000 and 300,000 temporary jobs usually disappear.
With the industry at -0.4%, wage increases risk being passed on to prices in 2026 or diluted via ISR. In practice, income erosion occurs due to price hikes in essential goods like electricity (+20%), eggs (+10.4%), and staples such as chicken, beef, and vegetables, which negate nominal improvements.
Key Questions and Answers
- What does the 1.7% growth figure indicate about Mexico’s economy? The 1.7% growth confirms that Mexico’s economy is advancing, albeit unevenly. While the agricultural sector saves the average and services sustain momentum, industry remains stagnant.
- What are the implications of this uneven growth? Uneven growth has clear fiscal implications. The primary sector contributes minimally to public finances, while the tertiary sector significantly impacts them. The stagnant secondary sector weakens the tax base, affecting investment, formal employment, and productivity.
- How does this growth pattern affect the labor market? The primary sector’s dynamism coexists with high informality levels. Wage increases risk being passed on to prices, eroding income due to essential goods’ price hikes.
