Mexico Q1 GDP Contracts 3.2% on Decade-Long Productivity Slump
Mexico’s GDP fell 3.2% on a seasonally adjusted annualized basis in Q1, with unadjusted real growth at just 0.1% year-over-year and broad-based contraction across all three economic sectors. Bank of America highlights an 8% drop in total factor productivity over the past decade, anticipates a 5.0% of GDP fiscal deficit and predicts Banxico will cut its 6.50% policy rate later this year.
1. Q1 GDP Contraction
Mexico’s seasonally adjusted annualized GDP declined by 3.2% in the first quarter, marking a broad-based downturn across manufacturing, services and agriculture and reducing unadjusted year-over-year growth to 0.1%.
2. Structural Productivity Decline
Total factor productivity has fallen by 8% over the past decade, and comprehensive employment indicators like the IGPOSE have shifted into contraction, underscoring deeper supply-side constraints.
3. Policy Response Outlook
Authorities are expected to widen the fiscal deficit to approximately 5.0% of GDP to support infrastructure spending, while persistent slack may prompt Banxico to reduce its 6.50% policy rate later this year.
4. Implications for Fomento Económico Mexicano
As FMX operates across retail, beverage and logistics segments, the weak economic backdrop, tighter consumer spending and evolving monetary conditions could weigh on sales growth and margins.