Slowdown in industrial activity and investment casts doubt on Plan Mexico’s ability to shore up the economy
Although Claudia Sheinbaum’s government has touted its plan, experts point to declining figures in sectors like manufacturing and construction, as well as weak public and private investment
The Mexican economy has lost momentum in the second half of the year, as weak investment and industrial activity complicated the country’s third quarter outlook. Preliminary figures released Tuesday by Mexico’s National Institute of Statistics and Geography (INEGI) suggest that a year-over-year decline of 0.6% is to be expected in August and September. Amid tariff uncertainty with the United States, the biggest setback last month was in industrial activity, which fell 0.3% compared to the same month in 2024. Although Claudia Sheinbaum’s government has touted its Plan Mexico’s ability to shore up the economy in the face of storm clouds, experts point to declining figures in sectors like manufacturing and construction, as well as weak public and private investment, which are casting a shadow over economic prospects heading into the final stretch of the year.
If the decline in August and September is confirmed, the country’s economic activity will have seen three consecutive months of contraction, after falling 1.2% compared to last year in July. INEGI’s economic activity indicator shows tertiary and service activities growing by 0.4% at an annual rate in August and 0.8% in September, slight increases that would not be enough to balance out losses in economic activity during the third quarter of the year. The indicator predicts that economic activity contracting at the start of the second half of 2025.
Sheinbaum presented Plan Mexico at the beginning of this year as her roadmap for tackling Donald Trump’s protectionist policies. Since then, her government’s commitment has been clear: to boost domestic production, increase the substitution of Asian imports, and promote greater industrial integration in North America under the umbrella of the USMCA trade agreement. The launch of the six-year strategy was accompanied by ambitious goals of attracting $277 billion in investment and creating more than 1.5 million jobs per year. Attaining those objectives seem difficult, given the current outlook. Washington’s continuous tariff attacks, reduced investment by the federal government, and the domestic economic slowdown have complicated the strategy’s takeoff.
Ignacio Martínez Cortés, coordinator of the Laboratory of Analysis in Trade, Economics and Business at the National Autonomous University of Mexico (UNAM), explains that the industrial contraction expected in August and September of this year are a reflection of the uncertainty surrounding foreign trade with the United States, primarily following the imposition of tariffs on two strategic sectors: 50% on steel and aluminum and up to 25% on automobiles shipped from Mexico to the United States. “Mexico is not immune to the global impact of Donald Trump’s tariff measures, and companies are evaluating whether to continue operating abroad, in places like Mexico, or to move part of their production to the United States,” he says.
Domestically, Martínez identifies a weak microeconomic outlook, with gross fixed investment failing to rebound, meager public spending, weak private consumption and finally, a decline in formal job creation. “Added to these factors is the scourge of insecurity, an element that is also taking its toll at the local level,” he says.
In regards to the role that Plan Mexico plays in reanimating the country’s economy, the expert criticized the fact that the next economic package will not allocate budget resources to the six-year plan, an oversight that makes it more of a political slogan than a feasible tool in achieving the 2030 goal. “Under these conditions, Mexico’s economy may grow in 2026 and 2027, but it will be due to its inertial attitude, not the implementation of the plan,” he concludes.
In contrast to the panorama during the last presidential administration, Mexico now faces greater uncertainty when it comes to international trade, including the United States’ threat to end the USMCA trade agreement, which covers more than 80% of Mexican exports. The uncertainty surrounding the future of trade relations between Mexico and the United States, coupled with Washington’s escalating protectionism, has brought private investment projects in Mexico to a standstill. In addition, with the largest fiscal deficit in three decades, at 5.7% of GDP, this administration has implemented an austerity plan and cut spending on public projects. Gross fixed investment, which is tracked by INEGI, shows a 6.4% drop between October 2024, the start of Sheinbaum’s six-year term, and last June.
Gabriela Siller, director of analysis at Banco Base, agrees that the weakest period will take place during the second half of the year, driven by a decline in manufacturing and construction. Banco Base’s own growth forecasts point to a maximum of 0.4% of GDP in 2025, far from the Treasury’s figures, which indicate an increase of anywhere between 1.8% and 2.8%. The most optimistic forecasts from international organizations point to a rise of 1% at most for the year. “We see that consumption is still stagnant, gross fixed investment is down, and although exports continue to underpin economic growth, that rise is no longer as high,” Siller adds.
Grupo Financiero Monex adds that growth expectations for the third quarter of 2025 face the challenge of weak secondary activities and a service sector that is beginning to moderate the pace of its growth. “Business confidence remains in contraction territory in the manufacturing, construction and retail sectors, although there has been a slight improvement in the last three months. Looking ahead, it will be key to monitor final figures for August, as they will confirm the magnitude of the ongoing slowdown,” states the financial institution.
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