Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 35
RHYTHMIC REASONING | TEMPO, TIMING AND TUNING
M E X I CO
Juan Manuel Herrera Betancourt
Eduardo Suarez Mogollon
Senior Economist, Investment Strategy
Vice President, LATAM Economics
Latest
2024
2025f
2026f
GDP Growth
0.1%
1.4%
-0.1%
0.6%
Inflation
3.6%
4.7%
3.9%
3.8%
Unemployment
2.7%
2.7%
3.0%
3.3%
Budget Bal.
-3.3%
-5.3%
-4.2%
-4.0%
Latest
2024
1-yr fwd
2-yr fwd
3-mo yield
7.5%
9.8%
7.5%
8.2%
10-yr yield
8.8%
10.5%
9.2%
9.5%
Yield curve slope
1.3%
0.7%
1.8%
1.3%
stimulus, and the risk overhang of U.S. trade policy as the
renegotiation of the U.S.-Mexico-Canada Agreement awaits next
year. Ongoing monetary policy easing should continue to help,
although the bulk of the relaxation in rates has already been
executed.
In the year-to July, Mexican GDP has expanded by a mere 0.2%
year-to-date (YTD) year-over-year (YoY), remaining roughly on
track for our expectations for no GDP growth in 2025. This year, a
significant deceleration in services sector activity has been partially
offset by a surge in agricultural output, with growth in these sectors
standing against a contraction in the extraction, construction, and
utilities industries while manufacturing holds little changed for the
year.
Fig. 1: Mexico has averaged no GDP growth in 2025
Source: Scotia Wealth Management, Bloomberg Finance LP.
KEY CONCLUSIONS
•
•
•
Mexico’s economic weakness is showing some early signs
of possibly bottoming out after practically no growth in
1H25, towards a firmer yet highly underwhelming pace of
expansion into the end of 2025 and a modest recovery in
2026.
The domestic economy remains challenged by weak job
creation, tight public finances, and trade risks, looking ahead
to the renegotiation of the U.S.-Mexico-Canada Agreement.
Sharp declines in remittances amid strict U.S. immigration
policy have also impacted households’ spending power.
Ongoing monetary policy easing should continue to help,
although the bulk of the relaxation in rates has already been
executed.
Mexico’s economic weakness is showing some early signs of
possibly bottoming out after a first half of the year when it
registered practically no growth (Fig. 1), giving way to a firmer
yet highly underwhelming pace of expansion into the end of
2025 towards a modest recovery in 2026. The domestic economy
remains challenged by weak job creation amid cautious business
sentiment, tight public finances that allow little in the way of
30%
YoY % change (6mma)
"Latest" values are as at September 30, 2025 and, for data other than bond yields,
pertain to the most recent monthly, quarterly, or annual reading available on
this date. GDP, inflation, and unemployment forecasts are based on Scotiabank
Economics forecasts dated September 11, 2025, budget balance forecasts
are based on median consensus estimate compiled by Bloomberg | 2024
inflation and unemployment are based on the average YoY rates for each
month of the year. | 2024 yields are as at December 31, 2024. Forward periods
are relative to September 30, 2025 and are based on forward market pricing.
20%
10%
0%
-10%
2022
Construction
2023
Manufacturing
2024
Mining
2025
Services
Total economy
Source: INEGI, Scotia Wealth Management.
As was widely expected, fiscal consolidation has resulted in a
material pullback in nonresidential construction of 15% YoY in the
first half of 2025, with the end of infrastructure megaprojects under
the previous administration (Fig. 2). On the other hand, residential
construction has significantly quickened its pace of growth to 8.4%
y/y YTD, from a 4.7% expansion recorded in 2024, reflecting the
support of lower policy rates, but also possibly a release of labour
and capital resources from public to private construction. Public
construction levelling out over 2026 should help to no longer
drag overall construction growth into negative territory, though its
stagnation will prevent greater growth in the building sector (and
in overall GDP).
International trade challenges due to tariffs have severely impacted
investment in machinery and equipment in the private sector (Fig.
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