The most recent indicators of the Mexican economy reinforce the idea that we are moving through an increasingly complex and worrying scenario. The signs of persistent weakening in industrial and manufacturing activity, combined with a marked deterioration in private consumption and growth expectations, reveal a panorama of economic stagnation that, if not corrected, could result in a recession in 2025 and possibly in 2026.
During the week that just ended, INEGI released a series of indicators, and unfortunately, the vast majority were negative. The first red flag appears in the Monthly Indicator of Industrial Activity (IMAI), which shows that in January 2025, with seasonally adjusted figures, industrial activity fell by 0.4% compared to December. Even more concerning is the annual decline of 2.8%, a figure that leaves no doubt about the structural weakness facing the industry.
By components, the data are no less alarming:
• Mining (mainly oil extraction): recorded a monthly contraction of 1.8% and a sharp annual decline of 8.6%.
• Electricity, gas, and water: fell 0.8% in the month, although it grew 1.0% annually.
• Manufacturing industries: decreased by 0.3% monthly and 0.9% annually.
• Construction: showed a slight monthly increase of 0.1%, but on an annual basis, the sector plummeted by 6.4%.
These figures confirm that the Mexican industry is undergoing sustained contraction, and there is no industrial activity sector capable of compensating for the losses of the others, as happened at the beginning of 2024 when the construction sector was driving the industry upwards. Now we see that construction and mining—two traditional engines of industrial activity—are particularly affected by the federal government’s public policies.
The second red flag comes from the results of the Monthly Survey of the Manufacturing Industry (EMIM) for January 2025. As anticipated with the IMAI publication, manufacturing production fell 0.4% monthly and 1.9% annually. The lack of productive dynamism highlights the weakness of this sector, a pillar of exports and formal job generation.
The third red flag arises from the Timely Indicator of Economic Activity (IOAE), which shows that the negative trend extends to the economy as a whole. INEGI anticipates that in February 2025, the Global Indicator of Economic Activity (IGAE) will register an annual drop of 0.7%, which, if confirmed, would be the largest decline for this indicator in four years.
The collapse is driven by the estimated contraction of 2.1% in secondary activities (industry and manufacturing), which would accumulate six consecutive months in negative territory. Meanwhile, tertiary activities (commerce and services) would barely achieve an annual growth of 0.4%, their lowest advance in nearly three years.
On a monthly basis, the IOAE forecasts a slight advance of 0.2% in the economy compared to January of this same year, which barely masks the annual blow.
The fourth red flag is that, according to INEGI, private consumption would have fallen by almost 2% in February, representing the largest contraction in a long time, excluding the confinement period during the pandemic. This decline in the second month of 2025 is not an isolated data point: there were also negative numbers in December. If we review the last six months (up to February), consumption barely shows minimal growth. But if we focus on the first five months of the current administration, the balance is negative with a contraction of -0.2%.
It is in this context of negative data that the analysts participating in the Citi Expectations Survey cut Mexico’s GDP growth forecast for 2025 for the third consecutive time. It is now estimated to grow by just 0.6%, which, in my view, is still quite optimistic. This GDP growth expectation of 0.6% is below the previous 0.8% reported in the survey two weeks ago. It is worth noting that the range of estimates from participants goes from 0.0% to 1.3%.
Of the participants, 30 project growth below 1.0%, while Banamex, Itaú BBA, and UBS predict zero growth. For 2026, expectations have also deteriorated, as the consensus adjusted the forecast to 1.7% from the previous 1.8%.
From my point of view, the current growth estimate of 0.6% will continue to be revised downward as more economic data are published and depending on the possible imposition of tariffs by the United States on April 2. If these protectionist measures are imposed, the impact on the Mexican economy will be profoundly negative, and we would be looking at a GDP contraction between -1% and -2.5%.
Fears of further deterioration in the Mexican economy are not unfounded. The tariffs that the United States could impose starting April 2 have already slowed investment in Mexico and caused fear among consumers. And it’s no wonder, as these tariffs represent the greatest threat to foreign trade—one of the few remaining drivers sustaining the economy.
But as I have mentioned in other pieces, it is not only the tariff threats from the United States that are holding us back. Mexico faces risks due to post-electoral political uncertainty (let’s recall how Morena and its allies stole the qualified majority and dismantled the remaining checks and balances through the reform of the Judiciary and the disappearance of autonomous bodies), a negative fiscal impulse due to the need to cut the high fiscal deficit from 5.9% of GDP in 2024 to 3.9% in 2025, and a lack of business confidence, given that the rules of the game can now change at any moment.
There is plenty of evidence that public investment has been cut due to the need for fiscal consolidation, while private investment is and will continue to be inhibited by the internal and external doubts mentioned earlier.
Another point worth mentioning is that the OECD has also just published its growth estimates for its member countries. In Mexico’s case, the expectation is just 0.1% for 2025, not including the tariff impact. If those measures are applied, their estimate drops to -1.3%. This is an optimistic scenario, given that uncertainty has already generated the negative effects on Mexico that I mentioned above.
Finally, it’s important to stress that hard data doesn’t lie. The Mexican economy faces a perfect storm: industrial slowdown, weak consumption, high political and trade uncertainty, and declining investment prospects. The anticipated drop in economic activity in February and the widespread downward revisions to growth expectations for 2025 and 2026 allow us to anticipate a scenario that, in the best case, will be one of stagnation and is highly likely to result in a technical recession if corrective measures are not taken.
If the federal government wants to avoid a recession, it faces a huge challenge—one that it’s unclear they even want to undertake. They must rebuild trust, guarantee an environment conducive to investment, and ensure macroeconomic stability. Surely there are officials in the government who know what must be done to correct the course. The big problem is whether some key figures within Morena, with their strong leftist ideology and desire to preserve the former president’s “legacy,” will allow them to work and do the right thing. In this context, to cover up their public policy mistakes, we should not be surprised if, in the near future, we hear a high-ranking government official declare that the problems and uncertainty caused by Donald Trump came “like a ring to the finger.”
These are times of great uncertainty, and with a subscription to GAEAP’s News Service, we can keep you informed.
Alejandro Gómez Tamez
CEO of GAEAP
alejandro@gaeap.com
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