Overview of Mexico’s Economic Situation
Mexico’s economy is currently operating at a very low pace, with data suggesting significant stagnation and a latent risk of falling into recession. However, if it were to happen, it would likely be less severe than previous episodes.
Key Economic Indicators
On May 19, the National Institute of Statistics and Geography (INEGI) released the Indicator of Opportune Economic Activity (IOAE), a precursor to the Monthly Gross Domestic Product (IGAE). The IOAE estimates that economic activity increased by 0.7% in April compared to the same month last year, but remained stagnant when compared to March of this year.
Within the IOAE, secondary activities (construction and manufacturing) are estimated to have decreased by 0.8% annually, while tertiary activities (commerce and services) grew by 1.5%. The tertiary sector, which accounts for more than half of the GDP, is preventing the economic needle from falling entirely into negative territory.
The Monthly Manufacturing Industry Survey, with estimates for March released, shows a yearly decline of 1.5% in manufacturing production volume. Given that manufacturing accounts for nearly 20% of the economy, this slowdown is a cause for concern as we approach mid-year.
On the demand side, the picture is not encouraging. According to the Indicator of Opportune Private Consumption (IOCP), private consumption is estimated to have decreased by 1.1% annually and 0.2% compared to March. Without a rebound in consumption—the most substantial component of domestic spending—any attempts to soften the recessionary threat will be challenging.
Expert Analysis and Context
At an event organized by the Council of the Americas, Rodrigo Mariscal, Chief Economist at Mexico’s Secretariat of Finance and Public Credit, explained that the Mexican economy does not meet the criteria for a recession, which typically involves being deep, widespread, and prolonged.
While the criteria can be debated, Mariscal’s data points are significant. During past recessions in 2008-2009 and 2020, employment plummeted in manufacturing, construction, and services. In contrast, since July 2024, construction has experienced notable losses, while manufacturing shows signs of fatigue. However, services continue to add jobs, and overall formal employment remains relatively stagnant rather than in freefall.
Mariscal also mentioned that for an economy to be considered in recession, more than 32 sectors must contract. Currently, only 22 are showing contraction, making it a useful albeit diverse indicator of economic health. Moreover, Mexico has not experienced two consecutive quarters of GDP decline—the technical minimum for a recession—as seen in the 1980s and 1990s or during the COVID-19 crisis.
Despite these reassurances, Mexico’s current economic weakness persists. The pressing matter is that the slow growth, averaging around 2% annually since the 1990s, is now urgently demanding credible paths for economic revival—infrastructure, investment, and productivity improvements—before the brakes are permanently applied.
Key Questions and Answers
- Q: Is Mexico currently in a recession? A: No, Mexico is not in a recession. Although the economy is growing at a very slow pace, it does not meet the criteria for a recession, which typically involves being deep, widespread, and prolonged.
- Q: How are different sectors performing? A: The secondary sector (construction and manufacturing) has seen a yearly decrease of 0.8%, while the tertiary sector (commerce and services) has grown by 1.5%. Manufacturing, which accounts for around 20% of the economy, has experienced a yearly decline of 1.5% in production volume.
- Q: What is the state of private consumption? A: Private consumption decreased by 1.1% annually and 0.2% compared to March, according to the Indicator of Opportune Private Consumption (IOCP). Without a rebound in consumption, any attempts to soften the recessionary threat will be challenging.
- Q: How many sectors need to contract for Mexico to be considered in recession? A: For an economy to be considered in recession, more than 32 sectors must contract. Currently, only 22 sectors are showing contraction.
- Q: Has Mexico experienced two consecutive quarters of GDP decline? A: No, Mexico has not experienced two consecutive quarters of GDP decline, which is the technical minimum for a recession.
