Mexico's Growth Exceeds Expectations Despite Tariff Threats

Mexico’s economy exceeded market expectations in February, just ahead of the US decision to impose reciprocal tariffs on a wide range of global imports. The Global Indicator of Economic Activity (IGAE) rose by 1% in February 2025, compared to January, in real terms and seasonally adjusted, according to INEGI. The data reveals that secondary activities increased by 2.5%, primary activities by 1%, and tertiary activities by 0.6% month-over-month.

This growth surpassed analysts’ expectations, which had forecast a 0.5% rise, and even exceeded Banamex’s projection of 0.6% growth, using seasonally adjusted figures. Year-over-year, the IGAE increased by 0.5%. tertiary activities rose by 1%, secondary activities by 0.4%, while primary activities declined by 4.3%.

In February, Mexico began feeling the impact of US President Donald Trump’s tariff policy, which targeted Mexican goods. However, the tariff implementation was paused following a phone call with President Claudia Sheinbaum. The IGAE shows growth in manufacturing, construction, services, and retail sectors, with some analysts suggesting that consumers made early purchases in anticipation of the incoming US tariffs.

Alfredo Coutiño, Director for Latin America, Moody’s Analytics, says that the positive February data and INEGI’s revision of January’s growth from -0.16% to a positive 0.15% indicate that Mexico could avoid a technical recession in 1Q25.

"With January revised positively and preliminary March data showing 0% growth, the first quarter now shows a 0.28% expansion compared to the previous -0.06%. Essentially, based on the IGAE, a second consecutive quarterly contraction was avoided," says Coutiño.

INEGI will release its Preliminary GDP Estimate on April 30, with the final figures expected on May 22. However, the likelihood of a technical recession at the beginning of 2025 remains high, though any 1Q25 contraction is expected to be minimal, says Luis Adrián Muñiz, Economist, Vector Casa de Bolsa.

Banamex says that, given the positive results from February and preliminary March figures, it now forecasts flat growth for 1Q25. This represents an improvement from the previously expected -0.2% contraction following the -0.6% drop in 4Q24.