Mexico’s Output Slips While Shoppers Hold the Line

INEGI’s July readouts delivered a split screen. The economy-wide activity index (IGAE) fell 0.9% from June and 1.1% year on year, pointing to a weak start to the third quarter.

Retail sales, however, inched up 0.1% on the month and rose 2.4% on the year, indicating households are still spending even as overall output cools.

Mexico is tightly tied to North American supply chains. Today’s global backdrop was softer on the production side.

The United States’ flash PMIs eased (Manufacturing 52.0; Services 53.9; Composite 53.6) and the Richmond Fed’s manufacturing gauge fell further to −17, while Europe’s September manufacturing PMIs stayed below 50 (Euro area 49.5; Germany 48.5; UK 46.2).

That combination—cooler external demand with still-okay services—tends to lean against Mexico’s factories while leaving consumer-facing activity more resilient.

The story behind the story

Where the weakness likely sits: A drop in IGAE alongside firmer retail usually means the drag is concentrated in primary and industrial sectors and in business-to-business services linked to trade and construction, not in day-to-day consumer outlays.

Momentum heading into Q3: A negative July “carry” means August–September must stabilize to avoid a flat quarter. The retail beat is a cushion, but not enough on its own if factories and trade stay soft.

Policy lens: With activity cooling and no sign of overheating consumption, the case for gradual, data-dependent monetary easing remains intact; the tone of upcoming inflation and activity prints will steer the pace rather than any single data point.

The simple takeaway

Mexico’s growth engine downshifted in July, but consumers didn’t slam the brakes. For international readers, think of an economy caught between softer global goods demand and still-decent local spending.

If external demand steadies, today’s split could resolve into a mild rebound; if it doesn’t, the consumer alone won’t carry the quarter.

Key figures (July)

IGAE: −0.9% m/m; −1.1% y/y
Retail sales: +0.1% m/m; +2.4% y/y
Global context (September flash): US Composite PMI 53.6; Euro area Manufacturing 49.5; Germany Manufacturing 48.5; UK Manufacturing 46.2; Richmond Fed Manufacturing −17