BY COMFORT OGBONNA
Mexico’s economy contracted in the first quarter of the year, shrinking by 0.6% compared with the previous three-month period, according to data released on Friday by the national statistics agency INEGI. The decline was slightly milder than economists’ expectations of a 0.8% drop, but it still reinforced concerns about weakening growth in Latin America’s second-largest economy.
The contraction followed a revised expansion of 0.7% in the final quarter of 2025, highlighting a sharp reversal in economic momentum at the start of the year. Economists say the latest figures suggest that Mexico’s slowdown is becoming more entrenched rather than being driven by a temporary disruption.
Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, said the weakness appeared widespread across key sectors of the economy. He noted that the data pointed to fading domestic demand rather than a single external shock, suggesting deeper structural softness in activity.
All three major sectors of the economy posted declines during the quarter. Primary activities, which include agriculture, fishing, and mining, saw the steepest fall, contracting by 1.7%. This decline reflects weaker output in resource-dependent industries that are often sensitive to both global commodity prices and domestic investment conditions.
The secondary sector, which covers manufacturing and construction, also declined by 1%, indicating reduced industrial output and softer demand for manufactured goods. This is particularly significant given Mexico’s strong reliance on manufacturing exports, especially to the United States.
The tertiary sector, which includes services such as retail, transportation, and financial activities, fell by 0.4%. While the decline was more modest compared with other sectors, it still signals that consumer spending and service-related activity have begun to weaken.
On a year-over-year basis, however, Mexico’s economy still managed to grow slightly, expanding by 0.2% compared with the same period a year earlier. Although this figure was marginally above economists’ expectations of 0.1% growth, it underscores the fragile nature of overall expansion.
Analysts remain cautious about Mexico’s economic outlook for 2026, with many expecting subdued growth to persist. Ongoing global uncertainty, including geopolitical tensions and fluctuating commodity markets, continues to weigh on investor confidence and trade expectations.
Domestically, policymakers are also grappling with a delicate balance between supporting growth and containing inflation. In early May, Mexico’s central bank reduced its benchmark interest rate by 25 basis points to 6.50%. The decision was not unanimous, with some board members urging caution given the uncertain economic environment.
Minutes from the central bank meeting highlighted concerns over both domestic economic weakness and external risks, including the potential impact of the ongoing U.S.-Israeli war with Iran. Policymakers noted that geopolitical instability could further disrupt global markets, adding pressure to an already slowing economy.
Despite the weak quarterly performance, some recent indicators suggest pockets of resilience. INEGI separately reported that Mexico’s economic activity increased by 0.4% in March compared with the previous month, exceeding economists’ forecasts. This monthly gain suggests that while overall momentum is weakening, short-term fluctuations may still produce occasional improvements.
Still, economists warn that sustained recovery will depend on stronger investment, improved global conditions, and greater clarity around international trade and geopolitical risks. Without these factors, Mexico’s economy may continue to struggle with uneven growth and limited momentum in the months ahead.