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    Mexico’s economy beats Q1 expectations, but outlook remains clouded amid trade tensions

    • May 1, 2025
    • admin

    Mexico’s economy grew more than expected in the first quarter of 2025, preliminary data from the national statistics agency INEGI showed on Wednesday.

    GDP grew by 0.2%, against a flat growth forecast in a Reuters poll.

    The slight recovery comes after a 0.6% contraction in the fourth quarter of last year and puts Latin America’s second-largest economy away from a technical recession, usually defined as two straight quarters of negative growth.

    Although the results came as a positive surprise, economists remain cautious.

    The increase was mostly driven by an increase in primary sector activity, while other significant sections of the economy exhibited symptoms of stagnation or contraction.

    Agriculture-driven recovery masks underlying fragility

    Agriculture, fishing, and mining saw an 8.1% increase, offsetting a slowdown in other industries.

    At the same time, the secondary sector, encompassing manufacturing and industrial activity, decreased by 0.3%, and the tertiary sector, which includes services, stagnated.

    Andres Abadia, Chief Latin America Economist at Pantheon Macroeconomics, said the quarter-on-quarter increase enabled Mexico to avoid a technical recession, but failed to change the wider picture of economic malaise.

    He cited increased domestic uncertainty, restrictive financial conditions, and persistent risks from the US trade war, adding that leading indicators already suggest a difficult outlook.

    President Donald Trump’s tariff threats have caused fresh trade tensions and added instability to the economy, particularly in Mexico, which relies largely on exports from the US.

    Year-on-year growth beats estimates, but momentum weak

    Mexico’s GDP grew by 0.8% year on year between January and March, slightly exceeding economists’ predictions of 0.6%.

    This expansion was once again mostly driven by the robust performance of the primary sector.

    However, analysts emphasised that the recovery is still unequal and vulnerable.

    Kimberley Sperrfechter, Capital Economics’ emerging markets economist, remarked that the latest statistics indicate a poor start to the second quarter and show persistent economic malaise.

    “This should pave the way for another 50 basis point rate cut at Banxico’s meeting next month,” Sperrfechter said, referring to the Mexican central bank.

    If adopted, it would be the third straight interest rate drop, indicating ongoing monetary support even as inflation has begun to rise.

    Policy levers and external pressure

    With inflation beginning to pick up in early April, Banxico must strike a difficult balance between promoting growth and managing pricing pressures.

    The central bank has already enacted substantial rate cuts in recent months to stimulate the economy, but their efficacy may be limited given ongoing external challenges.

    The volatile political and trade environments, notably the possible influence of the US presidential election cycle and changing global demand patterns, add to the uncertainty.

    Economists warn that without a broad-based rebound across sectors, Mexico’s economy would continue to struggle with low domestic demand and investment fear.

    The post Mexico’s economy beats Q1 expectations, but outlook remains clouded amid trade tensions appeared first on Invezz


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      Popular Topics
      • Sui price prediction: 2 reasons it could hit ATH after the Cetus hack
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      • “No chance” iPhones can be made in the US, analysts say — options Apple could explore instead to tackle tariffs

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