The outlook for the Mexican economy is deteriorating

Signs of deteriorating prospects for the Mexican economy are becoming increasingly visible. For example, just yesterday, the INEGI (National Institute of Statistics and Geography) reported that the annualized inflation rate rose to 4.42% in May, a significant increase from the 3.93% observed in April. Even more worrying is that the rate for the second half of May stood at 4.62%; the latest figures are even higher, and therefore no moderation in price growth is expected in June. This should undoubtedly concern the Bank of Mexico's Board of Governors, which seems to have decided to prioritize interest rate cuts at all costs and underestimate price trends.

Likewise, among the indicators also released yesterday, INEGI reported that the automotive industry had a poor month in May, reporting a decline in the volume of cars produced, sales volume, and export volume. Therefore, the outlook for this important sector of the Mexican economy is far from optimistic.

Meanwhile, last week, we learned that investment is also suffering a significant setback. Measured through the Gross Capital Formation indicator, during the first quarter of 2025, a 4.9% drop is reported compared to the same period last year. It is worrying that both private and public investment are showing declines. But it is precisely the public investment sector that is experiencing a considerable decline, registering a 22% decrease compared to the first quarter of 2024. This is consistent with the brutal drop of almost 20% in real terms in the budget exercised by President Sheinbaum's government during the first four months of 2025, compared to the same period in 2024.

Private consumption is in the same situation, falling 1.3% in March alone compared to March 2024. Meanwhile, Mexican exports to the US also suffered a decline in May, as did remittances sent by Mexicans living in the United States.

This isn't about conducting a detailed examination of the performance of each of the variables, but the recent performance of those I've listed, coupled with the unsettled international environment, indicates that difficult months are still ahead for the Mexican economy, even though the federal government refuses to acknowledge it.

The government has faced a much more complicated situation than I think they planned at the beginning of this year. Unfortunately, the severe imbalance in public finances inherited by President López Obrador's administration has forced President Sheinbaum's administration to tighten its belt and contain spending, to the point of underspending what was planned for the first four months of the year.

So, with consumption in decline, investment in the doldrums, and government spending on the brakes, we can't expect to see light at the end of the tunnel this year. Plan Mexico may be a good compendium of good intentions, but it's far from the short-term solution the country needs. It's unlikely to be the same for the medium and long term. Difficult times are ahead, no doubt.