Mexico’s economic growth continues; Outlook remains unchanged


Jesus Cañas and Juliette Coia

July 7, 2022

July 2022 Economic Report
GDP, real
January–March 22
(revised estimate)
Employment, formal
May 22
May 22
May 22
4.1% q/q 107,000 jobs m/m 7.6% y/y 20.1

Mexico’s economic growth in the first quarter was better than expected, with the second GDP estimate revised up to 4.1% annualized from 3.6% initially reported. Additionally, Mexico’s proxy for monthly GDP growth averaged 0.4% in April and May. However, slowing global economic growth, persistent supply chain bottlenecks, rising inflation and tighter monetary policy remain headwinds for the Mexican economy. Banco de México’s consensus GDP growth forecast for 2022 (fourth quarter/fourth quarter) remained unchanged in May (Table 1).

Table 1: Consensus forecast for Mexico’s growth, inflation and exchange rate in 2022

May April
Real GDP Growth (Q4/Q4)



Real GDP (average year/year)



IPC (Dec. 22/Dec. 21)



Exchange rate — pesos/dollar (end of year)



NOTE: CPI refers to the Consumer Price Index. The survey period was May 24-30.
SOURCES: Encuesta sobre las Expectativas de los Especialistas en Economía del Sector Privado: Mayo de 2022 (press release on economic expectations, Banco de México, May 2022).

The latest data available shows that exports, employment and retail sales have increased, while industrial production and remittances have declined. In May, the peso appreciated against the dollar, but inflation remained high.

Economic activity is growing

Growth in the Index of Global Economic Activity (IGAE) – the monthly proxy for GDP growth – was 0.1% in May and 0.8% in April (month-over-month) , a slight acceleration compared to the two previous months on average (Chart 1). The pick-up in activity was driven primarily by the goods-producing sector (including manufacturing, construction and utilities), which rose 15.1% in April and 0.1% in May. Services-related activities (including trade and transport) fell 11.8% in April but rose 0.7% in May. On an annual basis, the IGAE rose 1.0% in May and 1.3% in April.

Chart 1

Industrial production is slowing down

The three-month moving average of Mexico’s industrial production (PI) index, which includes manufacturing, construction, oil and gas extraction and utilities, fell in April from March, even as manufacturing output increased (Chart 2). On a month-to-month basis and on an unsmoothed basis, intellectual property fell 0.1% in April. North of the border, US intellectual property rose 0.7% in May after rising 1.0% in April. The correlation between intellectual property in Mexico and the United States has increased considerably with the boom in intra-industry trade between the two countries since the early 1990s. The Mexican manufacturing sector could see some slowdown in the second quarter, in especially if US consumer demand slows due to rising prices and higher interest rates.

Chart 2

Export growth picks up in April

Mexico’s three-month moving average of total exports rose 3.4% in April, with oil exports up 12.0% and the much larger manufacturing export category up 2.9% (Chart 3). Month-over-month and on an unsmoothed basis, total exports rose 0.5% in April, with oil exports rising 9.1% but manufacturing exports falling 0.4% . The recovery in oil prices has contributed to the recent growth in oil exports as Mexico’s oil production has been stable since mid-2021. Mexico’s total real monthly exports in April were 13.8% above pre-pandemic levels (February 2020) and 11.1% above levels a year ago (April 2021).

Chart 3

Retail sales continue to climb

Mexico’s real retail sales index rose 0.8% month-on-month based on a three-month moving average through March (Chart 4). On a month-to-month basis and on an unsmoothed basis, retail sales rose 0.4% in March. Retail sales reached pre-pandemic levels (February 2020) in October 2021.

Chart 4

Above-Trend Payroll Gains Continue

Formal sector employment – jobs receiving government benefits and pensions – rose 6.3% (107,000 jobs) year on year in May, after increasing 6.1% in April (Chart 5). Year-over-year job growth was 4.5% in May. Total employment, accounting for 56.1 million workers and including informal sector jobs, rose 5.9% year-on-year in the first quarter of 2022. The unemployment rate in April was 3 .1%, against 3.4% in March. Employment in Mexico returned to pre-pandemic levels in September 2021, although GDP remains 1.1% below its pre-pandemic level.

Chart 5

The peso strengthens in May

The Mexican currency averaged 20.0 pesos to the dollar in May, up slightly from April (Chart 6). However, the peso is still down 5.9% from its pre-pandemic level in February 2020. The peso has been under pressure due to high inflation and heightened uncertainty regarding domestic and global growth.

Chart 6

Remittances to Mexico continue to decline

The three-month moving average of actual remittances to Mexico fell 0.4% in April after falling 2.3% in March (Chart 7). However, on a monthly and unsmoothed basis, remittances increased by 2.8% in April. Most likely, remittance flows to Mexico are slowing due to high inflation in the United States and elsewhere, eroding disposable income, including funds for remittances. Remittances to Mexico peaked in November 2021. Record transfers of $50 billion in 2021 can be attributed to the depreciation of the peso between February and April 2020 as well as Mexican migrants abroad sending more money to help loved ones buy food or cover basic expenses during the pandemic.

Chart 7

The share of foreign public debt continues its downward trend

The three-month moving average of Mexican government securities held by foreigners fell to 17.4% in May, down 1.5% from its value in April (Chart 8). The magnitude of nonresidents’ holdings of public debt is an indicator of Mexico’s exposure to international investors and a sign of confidence in the Mexican economy. It should be noted that the metric has been on a downward trend since peaking in early 2015.

Chart 8

May inflation at highest since 2001

Mexico’s consumer price index (CPI) rose 7.6% in May from the previous 12 months, rising at the same pace as in April (Chart 9). Core CPI inflation (excluding food and energy) rose 7.3% in May over the previous 12 months. In June, Mexico’s central bank raised the benchmark interest rate to 7.75%, raising it by 75 basis points, the largest increase since 2008. In the public announcement accompanying the interest rate decision interest, the central bank cited several factors explaining the increase, including continued global and domestic inflationary pressures associated with the pandemic; increase in the prices of energy, agricultural and livestock products; the intensification of geopolitical unrest; and strict containment measures imposed by China. In addition, the central bank has said it intends to continue raising the benchmark rate if inflationary pressures persist.

Chart 9

about the authors

Jesus Canas

Cañas is a senior business economist in the research department of the Federal Reserve Bank of Dallas.

Juliette Coia

Coia is a research analyst in the research department of the Federal Reserve Bank of Dallas.

The opinions expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.


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