Caution and spirit coexist in investment and consumption

Amid the announcement of the new US tariff policy, caution remained the dominant sentiment among investors in Mexico in April, while, counterintuitively, consumer sentiment returned.

Thus, during the fourth month of the year, gross fixed capital formation (fixed investment) and private consumption sent mixed signals, according to reports released Thursday by the National Institute of Geography and Statistics (INEGI).

Initially, gross fixed capital formation (fixed investment) fell 1.7% compared to the previous month, leaving it at a level 7.7% lower than it was in April 2024.

This was the variable's eighth consecutive year-on-year decline and the steepest since the 9% drop recorded in January 2021, a time when the variable had been softening its declines after having fallen by almost 40% during the most acute phase of the Covid-19 pandemic, in April-June 2020.

Last April's results reflect caution about the future of North American trade integration. It was during the fourth month of the year that the United States announced its reciprocal tariff policy to the world. While it excluded Mexico, it generated anxiety due to uncertainty about how the country's tariff treatment would fare vis-à-vis other nations.

"The impact of tariffs—and not just tariffs, but the environment generated by the measures taken by the United States—has had some impact on Mexico," President Claudia Sheinbaum acknowledged during her morning address.

"The (economic) data for April and May are coming out, and they're going to have some impact, but public and private construction in Mexico is being 'uncovered,' and all of this will offset any impact that may have been generated by the uncertainty generated by the United States over the course of the second half of the year," he added.

He also noted that Plan Mexico seeks to "compensate for these potential losses" in various sectors and regions of our country.

In April, uncertainty also persisted regarding the execution of the election of members of the judiciary and the definition of secondary laws related to the constitutional reforms on telecommunications and economic competition.

With low citizen turnout, the judicial election was finally held in June—although its effects will be felt in the medium and long term—and this July, the telecommunications and competition laws were passed, with relatively minor changes than expected.

Consumption is reactivated

Meanwhile, contrary to what consumer sentiment data suggested, private consumption in Mexico picked up momentum in April.

During the fourth month of the year, it grew 1.1% compared to March, which allowed it to show an increase of 0.7% compared to April 2024, according to data from the Monthly Private Consumption Indicator (IMCP).

The year-on-year growth in the variable broke a four-month streak of declines. Moreover, it was surprising considering the preliminary estimate from INEGI (National Institute of Statistics and Census) itself.

In mid-June, the agency's Timely Indicator of Private Consumption (IOCP) projected a monthly growth in household spending on goods and services of just 0.1%, resulting in an annual decline of 0.8%, which ultimately did not occur.

The monthly IMCP reading also contrasts with indicators—also generated by INEGI—that pointed to a less favorable performance in consumption.

For example, consumer confidence continued to deteriorate, falling 0.6 points, marking its sixth consecutive monthly decline, according to the Consumer Confidence Index.

On the positive side, however, a net balance of nearly 170,000 new jobs was observed, according to the National Survey of Occupation and Employment (INEGI), although all of them were informal (93,000 formal jobs were lost).

Regarding remittances, although they fell 12.1% to $4.761 billion due to the year-on-year depreciation of the peso, they were 4.8% higher.

Meanwhile, consumer credit slowed slightly but continued to grow at double-digit rates—as it has over the past two years—expanding 10.4%, according to data from the Bank of Mexico.