Mexico’s private spending contracted by 0.40% quarter-on-quarter in Q3 2025, according to the latest release from the Sigmanomics database. This print matches the previous quarter’s decline and falls short of the 0.30% growth forecast, signaling ongoing softness in domestic demand. Over the past two years, private spending averaged a 1.10% quarterly expansion, highlighting the current weakness as a notable deviation.

Drivers this month

• Consumer goods and services spending fell 0.50%, driven by lower durable goods purchases.
• Housing-related expenditures remained flat, contributing 0.00 pp to the overall figure.
• Automotive sales declined 0.30%, reflecting tighter credit conditions.

Policy pulse

The Bank of Mexico’s benchmark interest rate remains elevated at 11.25%, aiming to curb inflation that still hovers near 5.80% YoY. This restrictive stance dampens borrowing and spending, keeping private consumption subdued relative to the central bank’s inflation target of 3% ±1 pp.

Market lens

Immediate reaction: The Mexican peso (MXNUSD) weakened 0.40% in the first hour post-release, while the 2-year government bond yield rose 8 basis points, reflecting concerns over slower growth and persistent inflation risks.

Private spending is a key driver of Mexico’s GDP, accounting for roughly 60% of total output. The latest contraction contrasts with the 2.20% QoQ surge seen in mid-2023 and the 1.50% growth recorded in Q2 2024. The Sigmanomics database highlights a pattern of volatility, with three negative quarters in the past year, including a sharp -1.40% dip in Q1 2025.

Monetary Policy & Financial Conditions

The Bank of Mexico’s hawkish stance, sustained since late 2023, has increased borrowing costs. Real interest rates remain positive, restraining credit growth. Consumer loan delinquencies have ticked up slightly, signaling tighter financial conditions that suppress spending.

Fiscal Policy & Government Budget

Fiscal policy remains cautious, with limited stimulus measures. The government’s primary balance is near neutral, constraining discretionary spending. Social transfers have increased marginally but have not offset the drag from higher taxes and energy price adjustments.

External Shocks & Geopolitical Risks

Global uncertainties, including US-China trade tensions and volatile commodity prices, have dampened export growth and investor sentiment. The recent slowdown in US consumption, Mexico’s largest trading partner, further pressures domestic demand.

Drivers this month

• Durable goods spending declined by 0.70%, the largest drag on overall private consumption.
• Services consumption fell 0.30%, reflecting cautious household budgets.
• Non-durable goods remained stable, cushioning the overall decline.

Policy pulse

Despite inflation easing slightly from 6.10% in Q2 to 5.80% YoY, the central bank’s policy rate remains restrictive. This stance is designed to anchor inflation expectations but limits consumer credit availability and spending.

Market lens

Immediate reaction: The MXNUSD currency pair depreciated 0.40%, while the 2-year yield climbed 8 basis points, signaling market concerns about growth prospects and inflation persistence.

Looking ahead, Mexico’s private spending trajectory hinges on several factors. The baseline scenario assumes gradual easing of inflation and moderate fiscal support, projecting a return to modest growth (0.50% QoQ) by Q1 2026. This scenario carries a 55% probability.

Bullish scenario (25% probability)

• Inflation falls faster than expected, allowing the central bank to cut rates by 100 basis points by mid-2026.
• Fiscal stimulus increases, boosting disposable incomes and credit availability.
• External demand recovers, supporting employment and wages.

Bearish scenario (20% probability)

• Inflation remains sticky above 5%, forcing prolonged monetary tightening.
• Geopolitical shocks disrupt trade and investment flows.
• Fiscal constraints limit government support, deepening consumer caution.

Structural & Long-Run Trends

Mexico’s private spending growth faces structural headwinds, including income inequality, informal labor market prevalence, and limited financial inclusion. Long-term reforms targeting productivity and social safety nets are critical to sustaining consumption growth beyond cyclical fluctuations.

The latest Sigmanomics database release confirms that Mexico’s private spending remains under pressure, with three straight quarters of contraction. Monetary tightening, subdued fiscal stimulus, and external uncertainties weigh heavily on consumer demand. While the labor market shows resilience, inflation and credit conditions limit spending growth. Policymakers face a delicate balance between controlling inflation and supporting growth. Market participants should monitor inflation trends, central bank signals, and fiscal policy shifts closely.

Strategic investors may consider exposure to sectors and assets sensitive to Mexican consumer trends, while hedging against currency and interest rate volatility.

Key Markets Likely to React to Private Spending QoQ

Mexico’s private spending data significantly influences several asset classes. Consumer discretionary stocks, the Mexican peso, and short-term government bonds typically respond to shifts in consumption trends. Below are five tradable symbols with historical sensitivity to Mexico’s private spending dynamics:

• MEXBOL – Mexico’s main equity index, sensitive to domestic consumption trends.
• MXNUSD – The peso-dollar exchange rate, reflecting capital flows and economic sentiment.
• WALMEX.MX – Walmart de México, a proxy for retail consumption health.
• USDMXN – The inverse of MXNUSD, often moves inversely with private spending strength.
• BTCUSD – Bitcoin, as a risk-on asset, often reacts to macroeconomic shifts including consumer confidence.

Insight: Private Spending vs. MEXBOL Index Since 2020

Since 2020, Mexico’s private spending QoQ growth has shown a moderate positive correlation (~0.45) with the MEXBOL index returns. Periods of rising private consumption, such as mid-2023’s 2.20% surge, coincided with MEXBOL rallies above 10%. Conversely, the recent three-quarter contraction in private spending aligns with a 7% pullback in MEXBOL over the same period. This relationship underscores the importance of consumer demand as a driver of equity market performance in Mexico.

FAQs

What does the latest Mexico Private Spending QoQ report indicate?

The report shows a 0.40% contraction in private spending for Q3 2025, signaling continued weakness in consumer demand.

How does private spending affect Mexico’s economy?

Private spending accounts for about 60% of GDP, making it a critical driver of economic growth and employment.

What are the key risks to Mexico’s private spending outlook?

Risks include persistent inflation, tighter monetary policy, geopolitical shocks, and limited fiscal stimulus.

Takeaway: Mexico’s private spending remains subdued amid restrictive monetary policy and external uncertainties. Recovery depends on inflation easing and fiscal support, with risks skewed to the downside in the near term.

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