NEW YORK — Mexico's economy expanded an estimated 2.8 percent on an annualized basis in the second quarter, rebounding from 0.5 percent growth in the first three months of the year. The acceleration, projected by government economists, reflects strengthening external demand and resilient domestic spending.
Manufacturing exports were the primary catalyst. Demand from the United States, Mexico's largest trading partner, drove production across key industrial sectors. Factory output rose 1.1 percent month-over-month in June, according to preliminary industrial production figures.
The nearshoring trend continued to pull foreign direct investment into Mexico, as companies relocate production closer to North American consumers — particularly in automotive and electronics. Capital inflows and job creation have concentrated in northern states.
Domestic consumption held firm, supported by stable employment and steady remittance flows. Retail sales for May, released by INEGI, rose 0.7 percent from April. Remittances from the United States remain a significant income source for Mexican households.
The services sector contributed as well. International tourist arrivals rose 15 percent year-over-year in June, surpassing pre-pandemic levels and lifting hotel occupancy across the country.
The Mexican peso strengthened against the dollar on the data, reflecting improved investor confidence. The currency's appreciation helps contain imported inflation, a central concern for Banco de México.
Fixed-income markets responded with spread compression on Mbonos across the intermediate curve. The 10-year Mbono yield fell six basis points to 9.25 percent, signaling reduced duration risk perception on domestic sovereign debt.
Inflation remains the binding constraint for Banxico. Consumer prices rose 4.8 percent year-over-year in June, still well above the central bank's 3 percent target. Core inflation registered 4.3 percent.
Banxico held its benchmark rate at 11.00 percent at its last meeting, citing persistent inflation risks. Analysts expect the central bank to keep rates elevated until inflation shows a clear downward trajectory toward target.
Risks to the outlook include a slowdown in U.S. economic activity, which would directly pressure Mexican exports. Fiscal policy also warrants attention, with government spending rising ahead of next year's general election.
INEGI is scheduled to release official Q2 GDP data July 30. Banxico's next policy decision follows Aug. 8.
