The IMF and the OECD recently upgraded their economic growth forecasts for Mexico in 2025, but the national statistics agency INEGI delivered some bad news this week: The economy contracted in annual and month-over-month terms in July.
Weighed down by weak primary and secondary sector activity, the Mexican economy declined 1.2% annually in July and 0.9% compared to June, INEGI reported.
In the first seven months of the year, GDP increased just 0.1% compared to the same period of 2024.
The annual contraction in July was the worst performance for the Mexican economy in any month since February 2021.
The month-over-month contraction was the worst sequential result since April 2024.
Analysts from the Monex financial group said that the economic result for July was “weaker than anticipated” and reinforced “signs of cooling in economic activity” in Mexico.
INEGI published its economic data for July on Tuesday, the same day that the Organization for Economic Cooperation and Development raised its 2025 growth forecast for Mexico to 0.8% from 0.4%. Last week, the International Monetary Fund revised upward its 2025 growth forecast for Mexico to 1% from a prediction in April of a 0.3% contraction.
Primary sector plunges 12.2% annually, secondary sector contracts 2.8%
INEGI’s data shows that Mexico’s primary sector, which includes agricultural, forestry and fishing activities, contracted 12.2% in July compared to the same month of 2024.
The secondary sector, which includes manufacturing, construction, mining and electricity generation and distribution, shrank by 2.8% annually.
The tertiary or services sector was the only sector to grow, expanding 0.4% compared to July 2024. Still, that level of growth was the weakest in four months for Mexico’s large services sector.
On a month-over-month basis, all three sectors contracted in July. The primary sector declined 3%, the secondary sector contracted 1.2% and the tertiary sector shrank by 0.4%.
In the first seven months of the year, the primary sector grew 2%, the secondary sector contracted 1.5% and the tertiary sector expanded 0.8%.
Gabriela Siller, director of economic analysis at Banco Base, said that the “poor performance of the secondary sector, particularly in construction and manufacturing, presents a significant risk for employment.”
The construction sector contracted 4.1% annually in July and 1.2% on a month-over-month basis. The sector’s poor performance was attributed in part to the decrease in government spending on infrastructure projects.
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The manufacturing sector declined 1.8% annually in July and 1.6% compared to June.
The significant contractions of the primary sector in July didn’t surprise the chief economist at the brokerage firm Valmex.
“Primary [sector] activities are characterized by being very volatile, with abrupt declines followed by sharp upturns, reflecting their high exposure to climatic and seasonal factors,” Gerónimo Ugarte said.
The month-over-month decline in the tertiary sector was attributed to factors including the decline in inflows of remittances and a wetter-than-normal rainy season in various parts of the country.
The outlook for the rest of the year
Banamex analysts anticipate that the Mexican economy will remain weak in the coming months. In a written analysis, they forecast that GDP will decline 0.2% in the third quarter of 2025 compared to the previous three-month period.
The Banamex analysts are predicting that the Mexican economy will grow 0.4% in 2025, on par with the forecast of the brokerage firm Vector.
Mexico’s Finance Ministry is forecasting growth of between 0.5% and 1.5% this year.
Uncertainty created by the United States’ volatile trade policy has affected the Mexican economy in 2025, although Mexican exports to the U.S. have continued to grow.
The USMCA free trade pact will be reviewed in 2026. The completion of the review process should provide greater certainty for the Mexican economy and investors in the years ahead.
With reports from El Financiero and El Economista
