The September 2025 Aggregate Demand YoY reading for Mexico came in at 0.30%, beating the consensus estimate of -0.80% and improving from the previous -0.20%. This marks a tentative recovery after a brief contraction in June 2025. The data, sourced from the Sigmanomics database, signals a modest rebound in domestic demand amid mixed global and domestic headwinds.

Drivers this month

• Consumer spending showed resilience, supported by stable employment and wage growth.
• Investment demand stabilized, reflecting cautious business confidence amid global uncertainties.
• Government expenditure remained steady, cushioning demand amid tighter fiscal conditions.

Policy pulse

The reading remains below the 12-month average of approximately 2.30%, indicating subdued demand relative to recent years. The Bank of Mexico’s ongoing monetary tightening to combat inflation continues to weigh on credit growth and consumption.

Market lens

Immediate reaction: The Mexican peso (MXN) appreciated modestly by 0.20% against the USD within the first hour post-release, reflecting improved sentiment on domestic demand strength. Short-term yields on MX government bonds edged lower, signaling reduced risk premia.

Examining core macroeconomic indicators alongside aggregate demand reveals a mixed but cautiously optimistic picture. Inflation remains elevated but has shown signs of moderation, with the latest CPI YoY at 4.50%, down from a peak above 7% in early 2024. Unemployment holds steady near 3.70%, supporting consumer spending.

Monetary Policy & Financial Conditions

The Bank of Mexico has maintained its policy rate at 11.25%, reflecting a commitment to tame inflation without derailing growth. Credit growth remains subdued, with commercial lending expanding only 1.10% YoY, constraining investment and consumption.

Fiscal Policy & Government Budget

Fiscal discipline persists, with the government targeting a primary surplus of 0.50% of GDP in 2025. Public investment has been prioritized in infrastructure, but overall spending growth is capped, limiting fiscal stimulus potential.

External Shocks & Geopolitical Risks

Mexico faces ongoing risks from US trade policy shifts and global supply chain disruptions. The recent US-China tensions and commodity price volatility add uncertainty, though Mexico’s diversified export base provides some insulation.

Historically, aggregate demand in Mexico has fluctuated between strong expansions above 4% in 2023 and contractions in early 2025. The current figure is the first positive reading since the slight dip in June 2025, signaling potential bottoming out.

Market lens

Immediate reaction: The MXN/USD exchange rate strengthened by 0.20%, while 2-year Mexican government bond yields fell 5 basis points, reflecting improved investor confidence in Mexico’s growth outlook.

Looking ahead, Mexico’s aggregate demand trajectory will hinge on several key factors. The Bank of Mexico’s monetary stance, fiscal policy flexibility, and external environment will shape growth prospects.

Bullish scenario (30% probability)

• Inflation continues to moderate, allowing a pause or cut in policy rates by early 2026.
• Fiscal stimulus targets infrastructure and social programs, boosting domestic demand.
• Global trade conditions improve, lifting exports and investment.
• Aggregate demand accelerates to 2.50-3.00% YoY by mid-2026.

Base scenario (50% probability)

• Monetary policy remains restrictive but stable, keeping inflation near target.
• Fiscal policy remains prudent with moderate spending growth.
• External risks persist but do not worsen significantly.
• Aggregate demand grows modestly around 1.00-1.50% YoY through 2026.

Bearish scenario (20% probability)

• Inflation surprises on the upside, forcing further rate hikes.
• Fiscal constraints tighten amid political pressures.
• Global shocks disrupt trade and investment flows.
• Aggregate demand contracts or stagnates below 0% YoY.

Mexico’s September 2025 Aggregate Demand YoY reading signals a tentative recovery after recent softness. While the positive surprise is encouraging, the broader macroeconomic environment remains challenging. Monetary policy tightening, fiscal prudence, and external uncertainties will continue to shape demand dynamics. Investors and policymakers should monitor inflation trends, credit conditions, and geopolitical developments closely.

Overall, the data suggests cautious optimism but underscores the need for balanced policy to support sustainable growth without reigniting inflationary pressures.

Insight: Aggregate Demand vs. MEXBOL Index Since 2020

Since 2020, Mexico’s aggregate demand YoY and the MEXBOL index have shown a positive correlation. Periods of strong demand growth, such as mid-2023’s 5.40% peak, coincided with MEXBOL rallies above 50,000 points. Conversely, demand contractions in early 2025 aligned with market pullbacks. This relationship underscores the importance of domestic demand as a driver of equity market performance in Mexico.

FAQ

What is Mexico’s Aggregate Demand YoY?

Mexico’s Aggregate Demand YoY measures the year-over-year percentage change in total domestic demand, including consumption, investment, and government spending.

Why does Aggregate Demand matter for Mexico’s economy?

Aggregate Demand reflects overall economic activity and growth potential. It influences inflation, employment, and policy decisions in Mexico.

How does the Aggregate Demand YoY affect the MXN currency?

Stronger aggregate demand typically supports the MXN by signaling economic strength, attracting investment, and influencing central bank policy.

Takeaway: Mexico’s positive rebound in aggregate demand YoY signals resilience amid tightening policies and external risks, but growth remains modest and uncertain.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.