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06/26/2026 | Press release | Distributed by Public on 06/26/2026 14:06

Mexican economy gains some momentum

Mexico Economic Update

Mexican economy gains some momentum

Jesus Cañas, Luis Torres and Diego Morales-Burnett

June 26, 2026

May 2026 economic report

GDP, real

Q1 '26Employment, formal

May '26 CPI

May '26 Peso/dollar

May '26

-0.6% q/q 18,000 jobs m/m 3.9% y/y 17.3

Mexico's monthly GDP estimate increased in April, following an annualized 2.4 percent contraction in output in the first quarter of 2026. Nevertheless, the consensus forecast for 2026 real GDP growth compiled by Banco de México fell to 1.1 percent in May from 1.4 percent in April (Table 1).

Other data also point to continued growth. Industrial production, exports and employment grew. Moreover, inflation slowed and the peso strengthened slightly against the dollar.

Table 1

Consensus forecasts for 2026 Mexico growth, inflation and exchange rate

April May

Real GDP growth in Q4, year over year 1.4 1.1

Real GDP growth in 2026 1.4 1.3

CPI December 2026, year over year 4.4 4.4

Peso/dollar exchange rate at end of year18.00 17.95

NOTES: CPI refers to consumer price index. The survey period was May 18-27.

SOURCE: Encuesta sobre las Expectativas de los Especialistas en Economía del Sector Privado: Mayo de 2026 (communiqué on economic expectations, Banco de México, May 2026).

Output grows in April

The general economic activity index (IGAE), Mexico's official proxy for monthly GDP growth, increased 1.2 percent in April (Chart 1). The goods-producing sector (including manufacturing, construction and utilities) rose 2.1 percent, while service-related activities (including trade and transportation) ticked up 0.7 percent. Compared to a year ago, the IGAE was up 2.2 percent.

Chart 1

Industrial production expands in April

The three-month moving average of Mexico's industrial production (IP) index, which includes manufacturing, construction, oil and gas extraction and utilities, grew 0.7 percent in April (Chart 2). Meanwhile, Mexico's manufacturing IP expanded 0.6 percent. In the U.S., the three-month moving average of industrial production rose 0.2 percent in May.

Chart 2

Export growth accelerates

The three-month moving average of Mexico's total exports rose 4.9 percent in April (Chart 3). Exports in the manufacturing sector, which account for the majority of trade, increased 4.7 percent. After bottoming out in January, oil exports have been growing and rose 18.3 percent in April amid rising energy prices. Year to date, total exports were up 17.4 percent and manufacturing exports increased 18.7 percent compared with the same period last year, while oil exports were 20.6 percent lower.

Chart 3

USMCA compliance surges amid U.S. trade policy shifts

The United States-Mexico-Canada Agreement (USMCA) provides tariff-free access to the U.S. market for qualifying Mexican goods. Higher U.S. tariff rates on non-USMCA goods have driven Mexican export compliance to surge from around 45 percent in early 2025 to roughly 80 percent in fall 2025 (Chart 4). USMCA-compliant goods avoid U.S. tariffs, providing qualifying Mexican manufacturers with a cost advantage over non-qualifying competitors as most products traded under the USMCA remain tariff-free.

Chart 4

Retail sales move sideways in April

The three-month moving average of the index for real retail sales remained unchanged in April (Chart 5). On a year-over-year basis, the smoothed retail sales index grew 3.4 percent. Consumption in Mexico has been driven mainly by rising purchasing power from minimum wage increases and direct government transfers, including universal payments to adults aged 65 and older.

Chart 5

Payrolls grow in May

Formal employment (jobs with government benefits and pensions) increased an annualized 1.0 percent (18,000 jobs) in May, slower than the 2.8 percent increase in April (Chart 6). On a year-over-year basis, formal employment grew 1.5 percent in May. Total employment, which represents 60.4 million workers and includes informal sector jobs, grew 0.7 percent year over year. The unemployment rate, which tracks only the formal sector, ticked up to 2.7 percent in May from 2.6 percent in April.

Chart 6

Mexican peso edges higher

The Mexican currency averaged 17.3 pesos per dollar in May, slightly stronger than April's 17.4 pesos per dollar (Chart 7).

Chart 7

Remittances fall in April

The three-month moving average of inflation-adjusted remittances to Mexico fell 1.5 percent in April after edging up 0.7 percent in March (Chart 8). Remittances had been growing since mid-2025 but have leveled off and remain below year-ago levels. Through April, remittances were down 0.6 percent compared with the same period in 2025. Transfers from the U.S. account for 95 percent of Mexican remittances.

Chart 8

Headline inflation slows in May

Mexico's headline consumer price index (CPI) grew 3.9 percent year over year in May after increasing 4.5 percent in April (Chart 9). Core CPI inflation, which excludes food and energy, slowed to 4.2 percent, while services inflation remianed at 4.6 percent. In June, Mexico's central bank maintained its benchmark rate at 6.50 percent. The central bank anticipates that above-target inflation will persist, returning to the bank's 3.0 percent target by the second quarter of 2027.

Chart 8