The Mexican economy expands in the third quarter, albeit at a slower pace

Mexico Economic Update

November 06, 2026

Mexico's economy grew 0.9 percent in the third quarter, slowing from the previous quarter according to preliminary estimates. Nevertheless, the consensus forecast for 2026 real GDP growth compiled by Banco de México improved slightly to 1.5 percent (Table 1).

Most other data point to continued growth. Industrial production, exports, retail sales and employment increased. However, the peso weakened and inflation accelerated.

GDP growth slows

Mexico’s GDP grew 0.9 percent in the third quarter of 2026, slowing from 1.4 percent in the second quarter but remaining above its 10-year average of 0.4 percent (Chart 1). Service sectors (wholesale and retail trade, transportation and business services) led output growth during the third quarter with a 1.1 percent quarterly increase. The goods-producing sector (manufacturing, construction, utilities and mining) experienced a 0.8 percent quarterly gain.

Industrial output edges up

The three-month moving average of Mexico's industrial production (IP) index, which includes manufacturing, construction, oil and gas extraction and utilities rose 0.5 percent in August, as did Mexico's manufacturing IP (Chart 2). In the U.S., the three-month moving average of industrial production rose 0.3 percent in September.

Exports continue growing

The three-month moving average of Mexico's total exports rose 2.3 percent in September (Chart 3). Exports in the manufacturing sector, the largest component of Mexico's trade, increased 2.3 percent. Oil exports declined 5.2 percent. Through September, total exports were up 25.4 percent, manufacturing exports grew 26.7 percent while oil exports were down 4.9 percent compared with the same period last year.

Retail sales rise

The three-month moving average of retail sales ticked up 0.3 percent in August (Chart 4). Year over year, the smoothed retail sales index grew 2.5 percent. Consumption in Mexico has been driven mainly by rising purchasing power from minimum wage increases and direct government transfers, including universal payments to adults aged 65 and older.

Hiring bounces back

Formal employment (jobs with government benefits and pensions) increased 2.3 percent (43,700 jobs) in September (Chart 5). Year over year, formal employment was up 1.6 percent. Total employment, which represents 60.1 million workers and includes informal sector jobs, contracted 0.5 percent year over year. The unemployment rate, which tracks only the formal sector, ticked down 0.1 percent to 2.6 in September.

Peso weakens slightly

The Mexican currency averaged 18.4 pesos per dollar in October, weaker than September's 17.3 pesos per dollar (Chart 6). The exchange rate had been little changed over the past few months before a sharp decline this month.

Remittances grow

The three-month moving average of remittances to Mexico rose 0.2 percent in September (Chart 7). Through September, remittances were 1.2 percent higher compared with the same period last year. Transfers from the U.S. account for 95 percent of Mexican remittances.

Inflation accelerates

Mexico’s headline consumer price index (CPI) grew 3.5 percent year over year in September, up from 3.3 percent in August (Chart 8). Meanwhile, core CPI inflation—which excludes volatile food and energy components—slowed to 3.8 percent, and services inflation reached 4.3 percent. Despite the overall pickup in headline inflation, Banco de México lowered its benchmark interest rate by 25 basis points to 6.25 percent in November. The central bank noted that economic slack persists and is expected to continue, posing downward risks to overall economic activity.

About the authors

Jesus Cañas is a senior business economist in the Research Department of the Federal Reserve Bank of Dallas.

Luis Torres is a senior business economist in the San Antonio Branch of the Federal Reserve Bank of Dallas.

Dylan Council is a research analyst in the Research Department at the Federal Reserve Bank of Dallas.

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