Economic Activity Declines in 3Q – 25

In the third quarter, GDP posted a -0.3% QoQ contraction, while weakness in industrial activity and the loss of momentum in the consumption sector persisted. As a result, our GDP forecast for 2025 would be revised from +0.60% to +0.35%.

In the ninth month of the year, monthly GDP recorded a decline—already anticipated since the release of the flash estimate of quarterly GDP—of -0.6% MoM, below our -0.3% expectation and the -0.1% projected by consensus. With this result, INEGI confirmed that during the third quarter the economy registered a -0.3% QoQ contraction.

By sector, the decline was driven by a -1.5% QoQ contraction in industrial activity. This segment has been affected by a drop in construction due to the adjustment of public investment aimed at containing indebtedness, as well as by a contraction in manufacturing, which has lost some momentum following the inventory-driven boost in the U.S. earlier this year.

The commerce and services sector remained the main engine of the domestic economy (+0.2% QoQ), although it has lost momentum in recent months. Households continue to favor basic consumption over discretionary spending amid the slowdown in the creation of new jobs.

The strong performance of the agricultural sector (+3.5% QoQ) stands out, supported by a favorable rainy season. This has also been reflected in lower prices for agricultural products, helping keep headline inflation within Banco de México’s target range.

Early indicators for the fourth quarter show that sluggishness in the domestic economy persists; thus, we will be revising our GDP growth forecast for 2025 from +0.60% to +0.35%.

Three factors make us somewhat more optimistic for 2026. First, once the reduction in indebtedness is consolidated in 2025, we anticipate that public investment could begin to recover next year. Second, domestic consumption could receive a positive boost from the 2026 FIFA World Cup. Third, despite a tense negotiation process for the USMCA renewal, we expect Mexico to maintain its competitive position in international trade with the United States. With this, we anticipate GDP will grow 1.6% next year.