Mexican economy shows continued growth in 2026

Mexico’s monthly proxy for GDP grew 2.3 percent year over year in January after the economy expanded an upwardly revised 1.8 percent in 2025. The consensus forecast for 2026 real GDP growth compiled by Banco de México rose to 1.5 percent in February, slightly up from 1.3 percent in January (Table 1).

The latest data, however, point to mixed growth. Retail sales and employment increased, while industrial production and exports ticked down. The peso gained ground against the dollar, and inflation remained elevated.

Output continues expanding in January

The global economic activity index (IGAE), the Mexico’s official monthly proxy for GDP growth, grew 0.3 percent in January after expanding 0.2 percent in December (Chart 1). The goods-producing sector (including manufacturing, construction and utilities) grew for the fourth consecutive month, rising 0.4 percent. Service-related activities (including trade and transportation) ticked up 0.3 percent. Compared to a year ago, the IGAE was up 2.3 percent.

Manufacturing industrial production contracts

The three-month moving average of Mexico’s industrial production (IP) index, which includes manufacturing, construction, oil and gas extraction and utilities, dipped 0.1 percent in January (Chart 2). Meanwhile, Mexico’s manufacturing IP contracted 0.3 percent. In the U.S., the three-month moving average of industrial production rose 0.4 percent in February 2026.

Exports fall

The three-month moving average of Mexico’s total exports decreased 1.4 percent in January (Chart 3). The manufacturing sector, which accounts for the majority of exports, fell 1.6 percent. Oil exports declined 9.6 percent. Year over year in January, total exports were up 9.2 percent, manufacturing exports increased 10.5 percent, while oil exports contracted 34.7 percent.

Retail sales growth continues

The three-month moving average of the index for real retail sales edged up 0.5 percent in December (Chart 4). On a year-over-year basis, the smoothed retail sales index grew 4.2 percent. Consumption in Mexico continues expanding, mainly driven by increased purchasing power from minimum wage growth and direct government transfers, including  universal payments to adults 65 and older.

Payrolls rebound in February

Formal employment (jobs with government benefits and pensions) increased an annualized 3.5 percent (65,400 jobs) in February after falling 3.9 percent in January (Chart 5). Compared to a year ago, employment grew 1.2 percent. Total employment, representing 60.1 million workers in January, and including informal sector jobs, grew 0.4 percent year over year. The unemployment rate, which tracks only the formal sector, remained at 2.6 percent in January.

Mexican peso appreciates further against dollar

The Mexican currency averaged 17.2 pesos per dollar in February (Chart 6). The peso gained ground against the dollar during all of 2025, mainly due to the interest rate differential between the two countries and overall U.S. dollar weakness.

Remittances little changed in January

The three-month moving average of inflation-adjusted remittances to Mexico increased 0.1 percent in January after falling 0.2 percent in December (Chart 7). Remittances had been growing since mid-2025 but have leveled off and remain below year-ago levels. Despite U.S. dollar weakness relative to the peso, remittances are down 4.0 percent compared with January 2025. Transfers from the U.S. account for 95 percent of Mexican remittances.

Headline inflation continues to rise in 2026

Mexico’s headline consumer price index (CPI) grew 4.0 percent year over year in February after increasing 3.8 percent in January (Chart 8). Core CPI inflation, which excludes food and energy, was up 4.5 percent, and services inflation was up 4.4 percent.

In February, Mexico’s central bank held its benchmark rate at 7.0 percent, in line with market expectations. The central bank anticipates above-target inflation will persist throughout the year, returning to the bank’s 3.0 percent target by first quarter of 2027, two quarters later than previously expected.