Mexico's economy unexpectedly contracts in March 2026

Mexico's economic activity index declined by 0.3% year-on-year in March 2026, a sharp reversal from the 3.3% growth recorded previously and far below the 1.7% increase that analysts had expected. This unexpected contraction marks the first negative reading in the indicator in recent months and points to weakening consumer and business confidence amid global tensions and rising domestic crime. While retail sales rose 5.0% annually, suggesting some resilience in spending, the broader drop in activity raises concerns that this strength may not be sustainable. The peso has rebounded to around 17.7 per dollar, aiding imports but risking inflation if not carefully managed. The Bank of Mexico has kept its key interest rate at 7.00% to control inflation, but may reassess policy if the slowdown persists. The data highlight growing vulnerabilities in Mexico’s growth outlook as the country navigates external shocks and internal security challenges.