This 1.5% growth reflects a considerable jump from the previously recorded 0.6% GDP contraction.
Mexico’s national statistics agency, INEGI, reported that the national economy expanded by 1.4% this quarter compared to the last. This rise is the strongest expansion for Mexico since early 2022, offsetting its 0.3% contraction in Q1.
The three main sectors, which INEGI has been tracking- farming, fishing and mining- reported a 2.4% growth during this period. Growth has, however, fallen short of analysts’ expectations of 1.5% published last month. It was reported in June that the Mexican economy’s Q2 growth was an improvement from the first quarter, reporting the fastest growth pace since late 2020.
This 1.5% growth reflects a considerable jump from the previously recorded 0.6% GDP contraction. In Q1, the three primary sectors recorded the steepest decline, with a fall of 1.7%. Therefore, the swift turnaround in the following quarter signals a much-awaited uptrend for Mexico.
According to INEGI’s reports, Latin America’s second-largest economy reported a 2.1% expansion in the second quarter, and its performance in June 2026 reflects a 2.8% rise compared to the same period last year. The economy also reported only a 0.1% contraction in June, compared to the previous month.
Official data also showed that Mexico’s 12-month inflation rate grew in August, while core inflation hovered around the same rate. Inflation rose from 3.10% in July to 3.26% in the first half of August, within the Bank of Mexico’s 3% targeted range. Consumer prices have also grown by 0.1% every month. The core price index has risen 3.93% in the past 12 months, climbing 0.8% from July to August.
The country’s central bank, Banxico, maintained its benchmark interest rate at 6.50% earlier this month, further extending the pause in place since June. This also extends Mexico’s timeline for inflation to remain within the targeted range.
The bank did not change the year-end forecasts of 3.5% for both headline and core inflation, clarifying that headline inflation would, however, converge to its 3% target only in Q4 of 2027, revising the earlier predictions of the second quarter of next year.
Banxico has identified price pressures, a global upheaval in the supply chain, climate shocks, geopolitical crises and the chance of a weaker peso as the reasons for higher inflation. The Central Bank also said that changing US policies are making it more difficult to predict forthcoming growth outlooks.
The bank is expected to maintain borrowing fees for the remainder of 2026, according to market analysts.
Banxico noted that the economy will probably remain slow due to residual spare capacity and obvious concerns that growth may not be sufficient.
After falling over the previous three months, Mexico’s GDP rose in the second quarter. The gross domestic product increased by 1.5% in the second quarter after falling by 0.6% in the first, according to preliminary figures published last week by INEGI.
Inflation levels in Mexico have continued to cool. Last month, headline inflation fell to 3.10% and core inflation fell to 3.95%. Policymakers are flagging that services such as restaurants, hotels and air travel are at risk of higher inflation. One of Mexico’s biggest challenges in containing inflation around 3% has been services inflation, which has remained at 4% since 2021. Central Bank officials explained that inflation in the sector is due to the slow nature of businesses in adjusting to price changes and rising labour costs and living expenses.
Economists have commended the positive performance of the peso in containing price pressures. A combination of the weakening greenback and Mexico’s own solid macroeconomic policies has helped the peso gain 6% so far this year.
The 1.5% growth of the country’s economy during the second quarter was linked to strong manufacturing exports, particularly non-automotive products. Industry experts have also pointed out that rising demand for AI and tech products has helped the LatAm country’s share of technology goods exports go from 5% in 2024 to 25% this year.
Analysts have also forecast that in the third quarter, construction, retail, and services sectors will report lower outputs as tourism and recreational activities will attract less demand and consumption compared to the previous quarter. This is primarily because the FIFA World Cup, which helped drive most of the tourism earlier this year, has concluded. GDP will also contract for the remainder of the year, which will result in shrinking quarterly growth.
The Mexican Ministry of Finance has forecast GDP growth between 1.8% and 2.8% this year, much higher than the 1.2% increase predicted by the IMF and the 1.1% increase predicted by market analysts. This Ministry’s estimates came after the IMF lowered its previous forecast of 1.6% to 1.2%. The Fund also lowered Mexico’s GDP growth forecast for 2027 from 2.2% to 1.9%.
The country’s Finance Ministry has maintained that the IMF’s revisions are not a result of domestic factors, but international geopolitical issues which have knocked the energy market for a loop. The Fund has therefore lowered its predictions for economies around the world. Moreover, the Ministry argued that in 2025, too, IMF estimates for Mexico were quite pessimistic, but the actual figures were closer to the government’s forecasts.
Mexico’s economy is currently recovering, reversing previous losses, thanks to growing industrial exports and strong base sectors. However, there are still issues, such as the service sector still under pressure and rising inflation. The overall economic future depends on striking a balance between consistent growth and strict monetary policy, despite Banxico’s continued cautious approach to interest rates in the face of geopolitical challenges and changing global trade policies.
