Mexico’s first-quarter GDP report came in better than the initial estimate, but not by enough to change the weak-growth picture. Output fell from the previous quarter, and every major activity group moved lower. The final data arrive days before Banxico is expected to update its outlook, after already saying the economy had more slack than previously anticipated. The figures also give a clearer read on where the slowdown was concentrated at the start of the year.
Mexico’s economy contracts less than expected in Q1
Mexico’s economy shrank less than first reported in the first quarter, but the final data still showed a broad loss of momentum across agriculture, industry, and services.
The country’s gross domestic product fell 0.6% from January through March compared with the previous quarter, based on seasonally adjusted figures released Friday. INEGI’s preliminary estimate in April had put the decline at 0.8%. The final reading also came in better than a median analyst estimate for a 0.8% drop.
On an annual basis, seasonally adjusted GDP was up 0.4% from the first quarter of 2025. In the original, non-seasonally adjusted table, INEGI listed total GDP growth at 0.2% for the quarter.
Broad weakness across major sectors
The contraction was not concentrated in one part of the economy. Primary activities, including agriculture, fell 1.7% from the previous quarter. Secondary activities, which include industry, manufacturing, and construction, fell 1.0%. Tertiary activities, which cover services, fell 0.4%.
The annual figures were mixed. Services rose 1.1% from a year earlier, and primary activities rose 0.3%, while secondary activities fell 1.1%.
Inside INEGI’s original annual table, manufacturing fell 2.0% from the first quarter of 2025. Temporary lodging and food-service activities fell 2.9%. That category includes hotels, restaurants, and related food-preparation services at the national level.
The temporary lodging and food-service decline should not be read as a local number for Puerto Vallarta. It does, however, give a national reading for a sector that includes hotels and restaurants, both of which are closely watched in tourism areas.
Banxico faces a weaker base
Banco de México had already noted before the final GDP release that economic activity contracted in the first quarter and that the economy had more slack than previously anticipated.
On May 7, Banxico cut the overnight interbank rate target by 25 basis points to 6.50%, effective May 8. The central bank said that the move ended the rate-cutting cycle that began in March 2024.
The bank also said it expected to keep the reference rate at its current level. Its latest quarterly report, covering late 2025, projected 1.6% growth for 2026, up from a previous estimate of 1.1%, following stronger-than-expected activity at the end of last year.
The next quarterly report will show whether Banxico keeps or lowers that projection after the first-quarter contraction.
