Rhythmic Reasoning_Highlights_SWM_EN - Flipbook - Page 10
MEXICO & CHILE
Mexico: Feeble growth ahead
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, giving way to a
firmer yet highly underwhelming pace of expansion into the end of 2025 and 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 stimulus, and
the risk overhang of U.S. trade policy as the renegotiation of the U.S.-Mexico-Canada
Agreement awaits next year. 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. The Fed’s recent embrace of rate cuts
has provided Banxico with greater slack, though upside inflationary pressures are
latent and will soon require greater caution.
Mexican Employment Growth Flatlines
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
1997
Weakness in labour markets over mid-2025 has been the fly in the ointment of Chile’s
economy this year, requiring a watchful eye for risks that household spending
deteriorates in the months ahead, with services price pressures acting as an additional
challenge for consumption – while limiting downside room for the central bank.
November (1st round) and December (2nd round) presidential elections point to a
likelier chance of victory for a business-friendly administration that could buoy growth
after a temporary lull in anticipation of elections and during the executive transition.
Polls have narrowed of late, however.
2003
2006
2009
2012
2015
2018
2021
2024
Formal employment (YoY % chg, 3 mth moving avg)
Chile: Mixed investment and labour signals ahead of election
Chile’s economy has exceeded expectations in 2025, buoyed by an outperformance of
investment and consumption. The former looks set to remain an important driver of
growth in 2026 as Chile’s macroeconomic equilibrium driven by the private and
household sector continues, maintaining a ~2.5% rate of growth this year and next.
2000
Chilean Investment Strength vs Soft Jobs Growth
12.0%
60%
9.0%
45%
6.0%
30%
3.0%
15%
0.0%
0%
-3.0%
-15%
-6.0%
-30%
2022
2023
2024
2025
Employment (YoY % chg, 3 mth moving avg) - LHS
Capital goods imports (YoY % chg, 3 mth moving avg) - RHS
