Overview of Fixed Investment Performance in May 2025
In May 2025, Mexico’s Gross Fixed Capital Formation (GFCF) – investments in machinery, transport equipment, and construction by economic agents – grew by 0.9% compared to the previous month, according to a report released today by the National Institute of Statistics and Geography (Inegi). However, this modest increase was insufficient to recover from the 1.6% decline in April, marking its ninth consecutive interannual decline.
Key Sectoral Performance
- Residential Construction: This sector led the modest growth in May, with a significant 7.8% monthly increase.
- Non-Residential Construction: Investment in this sector, dominated by public works, contracted by 4.4%.
- Machinery and Transport Equipment: Investment in these areas stagnated, with a global variation of 0%. Domestic product spending increased by 3.4%, while imports saw an 1.8% decrease.
Contextual Factors Affecting Investment
The investment landscape remains clouded by uncertainties surrounding potential changes in U.S. trade policies and domestic reforms that could alter Mexico’s business climate. Notable reforms include a new judicial appointment system through popular vote (elections held on June 1) and the creation of new regulatory bodies in telecommunications and competition areas (legislation tested in late June).
Government Efforts and Fiscal Impact
The Mexican government’s efforts to reduce its fiscal deficit from 5.7% of GDP in 2024 (the highest in nearly 30 years) to 3.9% of GDP in 2025 have led to substantial cuts in public investment, further impacting the investment climate.
Interannual Decline
From January to May 2025, GFCF has experienced an interannual decline of 7%, indicating a sharp loss in dynamism compared to the same period in 2024, when it grew at a rate of 9.6%.
- Public Investment: This component has plummeted by 22.2%, contrasting with a 7.8% growth in the same period of 2024.
- Private Investment: Private investment has also contracted by 5%, following a 9.8% growth in the previous year.
Key Questions and Answers
- What is Gross Fixed Capital Formation (GFCF)? GFCF refers to investments in machinery, transport equipment, and construction by economic agents.
- Why did investment growth fall short in May 2025? The modest 0.9% growth was insufficient to recover from the 1.6% decline in April, reflecting broader uncertainties in trade policies and domestic reforms.
- Which sectors contributed to the growth in May 2025? Residential construction saw a significant 7.8% monthly increase, while non-residential construction contracted by 4.4%. Machinery and transport equipment investment stagnated with a global variation of 0%.
- What are the notable reforms impacting investment? Reforms include a new judicial appointment system through popular vote and the creation of new regulatory bodies in telecommunications and competition areas.
- How have government efforts affected investment? The Mexican government’s fiscal deficit reduction efforts have led to substantial cuts in public investment, negatively impacting the investment climate.
- What is the interannual performance of GFCF in 2025? GFCF has experienced an interannual decline of 7% from January to May 2025, with public investment contracting by 22.2% and private investment declining by 5%.
