Introduction to the Economic Scenario
Mexico’s National Institute of Statistics and Geography (Inegi) recently reported the behavior of the Indicador Global de la Actividad Económica (IGAE) for August, highlighting the disparity between supply and demand dynamics.
Supply Side Observations
On the supply side, there have been minimal variations. The primary sector has shown reasonable dynamism, while the industrial sector has experienced a noticeable cooling. The service sector, however, has seen sluggish growth.
Demand Side Analysis
The demand side indicators reveal that external demand (exports) is the most dynamic driver of GDP in 2025, contrasting with a cautious internal demand (fixed investment and private consumption).
Export and Import Performance
In August, exports grew by 4.7%, while imports only increased by 0.4%. This growth in exports contrasts with the decline in fixed capital formation, which has seen a 6.8% decrease by July. This is far from the 7.8% growth observed in January-July 2024, despite record-breaking Foreign Direct Investment (FDI) inflows to Mexico, totaling $34,265 million by June.
Relevance of the Figures
To understand the significance of these figures, it’s essential to know who the key players are and how their actions impact the broader economy.
Key Players: Exports and FDI
Exports have been a critical factor in Mexico’s economic growth, accounting for nearly 80% of the country’s GDP. The recent 4.7% growth in August demonstrates the resilience of Mexico’s export sector, which has been vital in offsetting weaknesses in internal demand.
Foreign Direct Investment (FDI) is another crucial component of Mexico’s economy. The record-breaking $34,265 million in FDI inflows in the first half of 2025 signifies investor confidence in Mexico’s economic prospects. This investment is essential for capital formation and economic growth.
Internal Demand: Fixed Investment and Private Consumption
Fixed investment, or capital formation, has seen a 6.8% decline by July 2025, which is a significant slowdown from the 7.8% growth observed in the same period in 2024. This decline reflects businesses’ reluctance to invest due to economic uncertainties.
Private consumption has also contributed to the 0.4% decline in July, showing a notable distance from the 4.3% growth seen in the same period of 2024. This weakness in internal demand is a cause for concern, as it may hinder overall economic growth.
Impact on the Broader Economy
The current economic scenario has implications for employment, income distribution, and poverty levels. The ralentización (slowdown) of the labor market mentioned in the article is a direct consequence of these demand and supply dynamics.
Labor Market Ralentización
As businesses become more cautious about investments and consumers cut back on spending, job creation slows down. This ralentización in the labor market can lead to increased unemployment and underemployment, affecting income distribution and potentially exacerbating poverty levels.
Key Questions and Answers
- What are the key observations from Inegi’s IGAE report for August?
The report highlights minimal supply-side variations, with the primary sector showing reasonable dynamism, industrial sector cooling, and sluggish growth in the service sector. On the demand side, external demand (exports) is dynamic, while internal demand (fixed investment and private consumption) is cautious.
- Why are exports crucial for Mexico’s economy?
Exports account for nearly 80% of Mexico’s GDP, making them a critical driver of economic growth. The recent 4.7% growth in August demonstrates the resilience of Mexico’s export sector.
- What do the declining fixed investments indicate?
The 6.8% decline in fixed investments by July 2025 reflects businesses’ reluctance to invest due to economic uncertainties, which can hinder overall economic growth.
- How does the weak internal demand affect the broader economy?
Weak internal demand can lead to decreased job creation, increased unemployment and underemployment, and negatively impact income distribution and poverty levels.
