Mexico economic growth Q2 2025: Mexico’s economy picked up steam in the second quarter of 2025, expanding by 0.7% from the previous quarter on a seasonally adjusted basis. This robust growth number, released by the national statistics agency INEGI on July 30, exceeded analysts’ expectations and provided a welcome relief from recession fears. It marks a significant acceleration compared to the modest 0.2% increase recorded in Q1. On an annual basis, Mexico’s GDP was 0.1% higher in Q2 2025 than a year earlier – a small year-over-year rise, but notable because it confirms that the economy has skirted a potential contraction.
The stronger-than-forecast performance was driven by a surge in manufacturing output and a steady expansion in services. INEGI’s preliminary estimate (known as the “oportuna” flash GDP report) showed secondary industries (manufacturing, construction, utilities) grew 0.8% quarter-on-quarter. This sector benefited from booming export demand in automotive and electronics – Mexico’s factories ramped up production to meet orders from the United States, especially for goods not subject to any new trade restrictions. Meanwhile, tertiary industries (services) grew 0.7%, reflecting strength in commerce, transportation, and tourism as domestic spending improved. In contrast, the agricultural sector (primary activities) fell by 1.3%, as drought conditions in parts of the country hit farming output. However, the weight of agriculture in GDP is relatively small, and it did not derail the overall picture.
This Q2 report beat the consensus forecast of about 0.4% growth, according to a Reuters poll. It prompted several economists to revise upward their outlooks for 2025. The International Monetary Fund had just days earlier upgraded Mexico’s 2025 growth projection to +0.2% (from a prior call of a slight recession), and the new data suggest even that may be conservative. “The specter of recession has receded,” noted Gabriela Siller, an analyst at Banco Base, adding that Mexico found “unexpected momentum” from exports and resilient consumer spending. Indeed, one factor was the continued growth of U.S. industrial activity, which kept Mexican factories busy. Another was the stability of Mexico’s currency, the peso, which traded in a tight range and kept inflation in check, thereby supporting consumers’ purchasing power.
Policy and Reaction: Mexican officials welcomed the news. Finance Minister Arturo Herrera highlighted that the economy grew despite global headwinds like high interest rates and geopolitical tensions. He credited the government’s infrastructure push and social programs for supporting demand. The central bank (Banxico) had paused interest rate hikes earlier in the year as inflation slowed, and that monetary breather is thought to have aided credit and investment. President Sheinbaum, for her part, pointed to the data as validation of her administration’s approach since taking office in December: “We are demonstrating that with prudent management and strategic investments, Mexico’s economy is resilient and growing,” she said at a July 30 press briefing. However, Sheinbaum also cautioned that millions of Mexicans still feel economically insecure and vowed to intensify job-creation efforts.
Caution Ahead: While the Q2 jump is positive, analysts urge caution for the second half of 2025. Some temporary factors may have flattered the numbers – for example, a surge in auto exports as companies rushed shipments ahead of a threatened U.S. tariff (which was hanging over Mexico in late July) could have pulled activity into Q2. Additionally, labor market weaknesses persist: Banco Base pointed out formal employment growth has been sluggish, and unemployment ticked up slightly, indicating not everyone is feeling the recovery. Investment levels also remain below pre-pandemic highs, suggesting businesses are still cautious. If the U.S. economy slows later in the year (or if trade disputes worsen), Mexico’s export engine could cool. Banxico’s latest minutes mention that risks like U.S. protectionism and global financial volatility continue to cloud the outlook.
That said, the fact that Mexico has now logged two consecutive quarters of growth (0.2% in Q1, 0.7% in Q2) dispels immediate recession fears. It’s a notable turnaround from late 2024 when high inflation and interest rates had stalled the economy. The service sector’s steady expansion indicates domestic demand is gradually recovering, helped by easing inflation (which is down to ~4% from over 7% a year ago) and rising real wages, particularly after substantial minimum wage hikes in recent years. Exports, especially in manufacturing, remain a pillar. Mexico’s new status as the U.S.’s top trading partner in certain months of 2025 underscores the opportunity of “nearshoring,” as companies invest in Mexico to diversify supply chains. Indeed, officials have been courting foreign investment in high-tech manufacturing and renewable energy, which could further boost growth.
Looking ahead, the final GDP figures will be released in late August, but the early estimate has injected optimism. Mexico’s Central Bank is expected to hold its key interest rate steady at 11.25%, balancing the need to support growth while keeping an eye on inflation. For now, Mexico can breathe a sigh of relief that it has avoided a downturn and even outpaced expectations. As one commentator put it, “The ghost of recession is off the table – Mexico is quietly growing again.” The challenge will be to maintain this momentum amid whatever challenges the rest of 2025 brings.
