Mexico’s private spending YoY declined by 0.40% in September 2025, improving from June’s -0.60% but missing the 0.20% consensus estimate. This marks the third consecutive quarter of contraction, a notable shift from the robust growth seen in 2023 and early 2024. The Sigmanomics database shows private spending peaked at 5.10% YoY in March 2024 before a steady slowdown.

Drivers this month

• Lower consumer confidence amid inflationary pressures.
• Rising borrowing costs due to tighter monetary policy.
• Weaker remittance inflows affecting household income.
• Moderate recovery in manufacturing and retail sectors.

Policy pulse

Private spending remains below the Bank of Mexico’s inflation target zone, reflecting subdued domestic demand. The central bank’s cumulative rate hikes since late 2023 have tightened financial conditions, dampening credit growth and consumer spending.

Market lens

Immediate reaction: The MXN/USD currency pair depreciated 0.30% within the first hour post-release, reflecting concerns over slower domestic demand. The 2-year government bond yield rose 5 basis points, signaling increased risk premia on short-term debt.

Private spending is a critical gauge of Mexico’s domestic economic health. The latest -0.40% YoY contrasts sharply with the 4.30% average growth recorded in the 12 months before March 2025. Core inflation remains sticky at 4.70% YoY, while unemployment holds steady near 3.80%, indicating labor market resilience despite spending weakness.

Monetary Policy & Financial Conditions

The Bank of Mexico has raised its benchmark rate by 425 basis points since late 2023, aiming to curb inflation. This has increased borrowing costs, with consumer loan rates rising from 12.50% to 15.30% over the past year. Tighter credit availability has directly impacted private consumption.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with a 2025 budget deficit target of 2.50% of GDP. Increased social spending and infrastructure projects aim to support growth, but limited fiscal space constrains stimulus potential amid global uncertainties.

External Shocks & Geopolitical Risks

Mexico faces external headwinds from slowing US demand and persistent supply chain disruptions. Geopolitical tensions in the Americas and trade uncertainties with key partners add risk to export-driven growth, indirectly affecting consumer confidence and spending.

Sector-wise, retail sales and services have shown the largest drag, while durable goods consumption has stabilized. Inflation-adjusted wage growth remains weak, limiting purchasing power. The Sigmanomics database confirms a correlation between private spending and consumer credit growth, which has slowed to 1.20% YoY from 5.80% in mid-2024.

Market lens

Immediate reaction: The MXN depreciated 0.30%, while 2-year yields rose 5 basis points, reflecting market caution. Inflation breakevens edged lower, signaling tempered inflation expectations amid slower spending.

Looking ahead, Mexico’s private spending trajectory will hinge on several factors. A bullish scenario (30% probability) assumes inflation eases below 4%, enabling the central bank to pause rate hikes by Q4 2025. This would lower borrowing costs, boosting consumption and pushing private spending back to positive territory (1.50% YoY) by mid-2026.

The base case (50% probability) expects continued subdued growth with private spending hovering near zero through 2026. Inflation remains sticky, and global uncertainties persist, limiting consumer confidence and credit expansion.

The bearish scenario (20% probability) envisions a sharper downturn triggered by renewed external shocks or fiscal tightening. Private spending could contract further (-1.50% YoY), exacerbating growth risks and pressuring the peso and financial markets.

Structural & Long-Run Trends

Mexico’s demographic dividend and expanding middle class support long-term consumption growth. However, structural challenges such as income inequality, informal employment, and limited financial inclusion constrain spending resilience. Digital transformation and e-commerce growth offer new consumption channels but require supportive policies.

Mexico’s private spending contraction in September 2025 reflects a complex interplay of tighter monetary policy, external headwinds, and structural constraints. While the slight improvement from June is encouraging, sustained recovery depends on inflation moderation, fiscal support, and global demand stabilization. Policymakers face a delicate balancing act to nurture growth without reigniting inflation.

Financial markets are likely to remain sensitive to private spending data as a barometer of domestic demand. The peso’s recent volatility and bond yield shifts underscore investor caution. Close monitoring of credit conditions and consumer sentiment will be essential for anticipating Mexico’s economic trajectory.

Key Markets Likely to React to Private Spending YoY

Private spending data in Mexico is a critical indicator for multiple asset classes. The MXN currency pair often reacts swiftly to shifts in domestic demand, reflecting changes in trade balances and capital flows. Mexican government bonds respond to growth and inflation outlooks, influencing yields. Additionally, regional equity indices and select commodities tied to consumer activity show correlated movements.

• MXNUSD – Directly impacted by private spending trends through trade and capital flows.
• MEXBOL – Mexico’s main equity index sensitive to consumer sector performance.
• WALMEX.MX – Retail giant reflecting consumer spending health.
• BTCUSD – Crypto markets show risk sentiment shifts linked to economic data.
• USDMXN – Inverse of MXNUSD, also sensitive to private spending changes.

Insight: Private Spending YoY vs. MXNUSD Since 2020

Year	Private Spending YoY (%)	MXNUSD Annual Change (%)
2020	-7.20	-12.50
2021	3.80	8.30
2022	2.50	-4.70
2023	4.30	3.10
2024	2.90	-1.20
2025 (YTD)	-0.40	-2.80

The table shows a positive correlation between private spending growth and MXNUSD appreciation. Periods of strong consumption coincide with peso strength, while contractions align with depreciation, underscoring the peso’s sensitivity to domestic demand.

FAQs

What does Mexico’s Private Spending YoY indicate?

Private Spending YoY measures the annual change in consumer and business spending, reflecting domestic demand strength in Mexico’s economy.

How does Private Spending YoY affect Mexico’s economy?

It influences GDP growth, inflation, and monetary policy decisions by indicating consumer confidence and credit conditions.

Why is the Private Spending YoY important for investors?

It signals economic momentum, impacting currency valuations, bond yields, and equity market performance in Mexico.

Takeaway: Mexico’s private spending contraction signals ongoing domestic demand challenges, but recent stabilization offers cautious optimism. Policy calibration and external factors will determine the pace of recovery.

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

Key Markets Likely to React to Private Spending YoY

• MXNUSD – Mexican peso vs. US dollar, sensitive to domestic demand shifts.
• MEXBOL – Mexico’s main stock index, reflects consumer sector performance.
• WALMEX.MX – Retail sector bellwether, closely tied to consumer spending.
• BTCUSD – Bitcoin, a proxy for risk sentiment impacting emerging markets.
• USDMXN – Inverse of MXNUSD, also tracks private spending trends.