Understanding Mexico's economic landscape via data transformations

Key Takeaways

• The latest update on the SHF House Price Index reveals that house price inflation reached 8.92% YoY as of October 1, 2025, reflecting a continuing trend of rising prices over the past three quarters.
• The Dynamic Factor Model (DFM) nowcast indicates a contrasting picture, with a current estimate of 7.72% YoY as of February 1, 2026, trailing the observed inflation by 1.20 percentage points.

The latest update on the SHF House Price Index reveals that house price inflation reached 8.92% YoY as of October 1, 2025, reflecting a continuing trend of rising prices over the past three quarters. This inflation rate stands above the historical average, which has ranged from 2.0% to 11.7%, positioning it in the 80th percentile since 2006. Notably, house price inflation exceeds both headline CPI at 4.02% and housing CPI at 3.44%, highlighting a significant premium of 4.90 percentage points over the former and 5.49 percentage points over the latter. This divergence suggests a robust demand in the housing market that may not be fully captured by broader inflation metrics, although the recent DFM nowcast hints at potential downward pressure.

The Dynamic Factor Model (DFM) nowcast indicates a contrasting picture, with a current estimate of 7.72% YoY as of February 1, 2026, trailing the observed inflation by 1.20 percentage points. This divergence implies that auxiliary indicators, particularly mortgage lending trends and housing CPI components, are exerting downward pressure on the underlying trend. The model suggests that while house prices have been rising, there may be emerging signs of mean reversion, prompting a cautious stance on future price increases. Policymakers and market participants should consider this nuanced interplay when assessing the housing market's outlook.

The SHF House Price Index is published quarterly by Sociedad Hipotecaria Federal, Mexico's federal mortgage development bank, typically around 40 days after the reference quarter ends. It is constructed from mortgage appraisal data (avalúos) using a Case-Shiller repeat-sales methodology, with breakdowns by state, new vs. used housing, and market segment (affordable vs. mid-to-high-end). Because the index reflects prices at the point of mortgage origination, it captures credit-driven demand rather than asking prices, making it a tighter gauge of actual transaction values and collateral quality across the housing market.

A Dynamic Factor Model (DFM) filters the quarterly SHF House Price Index using five Banxico auxiliary series — the funding rate, mortgage lending volumes, a housing purchase survey indicator, the SPF unemployment forecast, and construction activity — plus two CPI components (headline and housing subcategory). The model extracts a common factor from these seven indicators, producing a smoothed nowcast that updates between quarterly SHF releases whenever auxiliary data arrive. This filtered estimate helps distinguish persistent trends from quarterly noise in the observed house price series.

Out-of-sample backtest over 12 evaluation windows using the Dynamic Factor Model (DFM). Out-of-sample backtest over 12 evaluation windows using the Dynamic Factor Model (DFM). RMSE measures the typical forecast error in the same units as the series; 'naive' is a no-change benchmark. House Price Nowcast (RMSE 1.32 vs 0.66 naive, n=12).

Key Takeaways

• Brent oil prices have surged to $99.41 as of March 2026, reflecting a 38.6% increase year-on-year.
• Copper prices reached $12,528.71 in March 2026, demonstrating a robust 28.7% increase from the previous year but facing recent downward pressure.
• Corn prices are now at $213.30 as of March 2026, reflecting a modest annual increase of 2.7%, and maintaining a stable trend.

Brent oil prices have surged to $99.41 as of March 2026, reflecting a 38.6% increase year-on-year. With Brent oil data updated to March 2026, prices now sit at $99.41, showing a notable 38.6% rise compared to last year. The momentum is clearly upward, with a monthly increase of 43.2%. This surge in oil prices is particularly relevant for Mexico, where oil is a significant export, impacting federal revenue and regional economies.

Copper prices reached $12,528.71 in March 2026, demonstrating a robust 28.7% increase from the previous year but facing recent downward pressure. Copper, as of March 2026, stands at $12,528.71, up 28.7% year-on-year. However, it’s on a downward trend recently, with a monthly decline of 3.3%. This fluctuation is crucial for Mexico's mining sector, which is heavily reliant on copper production.

Corn prices are now at $213.30 as of March 2026, reflecting a modest annual increase of 2.7%, and maintaining a stable trend. Corn prices updated to March 2026 are at $213.30, showing a small year-on-year increase of 2.7%. The trend appears stable, with only a slight monthly rise of 1.3%. Given that Mexico is a net importer of corn, these price dynamics directly influence food prices and the costs of staples like tortillas.

Commodity prices feed directly into Mexico's inflation pulse and terms of trade. Oil and corn affect energy and food costs, while copper is a proxy for global industrial demand. For policymakers, sharp commodity swings can shift inflation expectations and fiscal balances, making these prices critical to monitor.

Key Takeaways

• The April 2026 IMSS release shows unit labor costs at 3.66%, indicating wages are currently outpacing productivity.
• Real wages in the formal sector are on an upward trajectory, enhancing purchasing power for workers.
• Manufacturing and retail diverge significantly in real wage dynamics, with manufacturing notably outperforming retail.

The April 2026 IMSS release shows unit labor costs at 3.66%, indicating wages are currently outpacing productivity. Following April's formal sector wage data, ULC in manufacturing is rising, reflecting a scenario where wage growth exceeds productivity gains. Specifically, the latest growth rate is at the 80th percentile and has increased by 1.23 from the previous month. This trend raises concerns about potential cost-push inflation pressures that could undermine competitiveness in the sector.

Real wages in the formal sector are on an upward trajectory, enhancing purchasing power for workers. Manufacturing real wages have registered a growth rate of 4.48%, a notable increase that signifies expanding purchasing power among workers in this sector. This positive trend contrasts with the retail sector, where real wage growth is relatively lower at 3.25%, although it too remains in positive territory. The net effect is a bolstered financial position for households employed in manufacturing, enhancing their consumption potential.

Manufacturing and retail diverge significantly in real wage dynamics, with manufacturing notably outperforming retail. Across sectors, the manufacturing segment exhibits a stronger growth rate in real wages, currently at 4.48%, compared to the retail sector's 3.25%. This disparity suggests that while both sectors are experiencing positive real wage growth, manufacturing is delivering superior benefits to its workforce. The lagging growth in retail could indicate underlying challenges in this sector, potentially affecting consumer spending patterns.

Unit labor costs (ULC) measure the average cost of labor per unit of output — when wages grow faster than productivity, ULC rises, potentially squeezing profit margins and fueling inflation. In Mexico, where the formal sector employs roughly half the workforce, IMSS-registered wage data captures trends in the formal economy but misses the informal sector's dynamics. Real wages — nominal wages adjusted for inflation — determine household purchasing power and underpin consumer demand. For policymakers, these indicators help balance inflation control, competitiveness, and the economic welfare of Mexican workers.

Twelve-month-ahead forecasts for unit labor costs and real wages in manufacturing and retail are produced using a Seasonal Autoregressive Integrated Moving Average with eXogenous inputs (SARIMAX) model. The model is estimated on seasonally adjusted month-over-month percentage changes, with all four series — ULC manufacturing, ULC retail, real wage manufacturing, and real wage retail — entering as joint endogenous variables. No external auxiliary data feed the forecast; the model relies solely on the internal dynamics and cross-series interactions of the wage and productivity data. Forecast confidence intervals widen over the projection horizon.

Out-of-sample backtest over 24 evaluation windows using the SARIMAX. Out-of-sample backtest over 24 evaluation windows using the SARIMAX. RMSE measures the typical forecast error in the same units as the series; 'naive' is a no-change benchmark. ULC Manufacturing (RMSE 2.97 vs 3.21 naive, +7% improvement, n=24); ULC Retail (RMSE 5.33 vs 5.22 naive, n=23); Real Wage Manufacturing (RMSE 2.20 vs 2.62 naive, +16% improvement, n=24); Real Wage Retail (RMSE 3.05 vs 2.97 naive, n=23).

Key Takeaways

• The latest ENOE survey shows unemployment at 3.31%, continuing a downward trend and signaling a healthier job market.
• By gender, the unemployment landscape reflects stark disparities, with male unemployment at 3.51% and female unemployment slightly higher at 3.62%.
• Informal employment remains a considerable aspect of the labor market, with the share of informal workers now at 55.9%.

The latest ENOE survey shows unemployment at 3.31%, continuing a downward trend and signaling a healthier job market. The 2026-05 ENOE survey shows unemployment at 3.31%, around the 2nd percentile historically. This represents a decrease of 0.131% from the previous month, marking a positive shift in employment conditions. Meanwhile, the underemployment rate has also fallen to 12.2%, suggesting improvement in labor utilization and a potential boost for consumer confidence.

By gender, the unemployment landscape reflects stark disparities, with male unemployment at 3.51% and female unemployment slightly higher at 3.62%. Male and female unemployment rates have both risen modestly over the past month, with increases of 0.162% for men and 0.0803% for women. This divergence highlights ongoing challenges in creating equitable job opportunities, as the gap remains tight yet significant, particularly in sectors traditionally employing more women.

Informal employment remains a considerable aspect of the labor market, with the share of informal workers now at 55.9%. The share of informal workers has increased by 0.353% from the previous month, indicating a persistent reliance on informal employment. This trend raises concerns about job security and the lack of benefits for a substantial portion of the workforce, signaling potential vulnerabilities in economic stability.

Labor slack and its composition shape inflation pressure, policy timing, and social risk. Unemployment, underemployment, and unemployment by gender reveal how broad and uneven slack is. In Mexico's large informal sector, the informal employment share can swing sharply — often contracting faster in downturns as unprotected jobs are cut first, then rebounding early — masking true slack if headline unemployment alone is tracked. Tracking these dimensions helps distinguish cyclical slack from structural mismatches and calibrate monetary policy accordingly.

Between quarterly ENOE survey releases, a Dynamic Factor Model (DFM) nowcasts employment indicators using higher-frequency auxiliary data. The model ingests monthly series — industrial production, consumer confidence, capacity utilization, retail sales, and private consumption — alongside quarterly GDP components to extract common factors that track the business cycle. When any auxiliary series receives new data, the Kalman filter updates the nowcast, providing an early signal before the next official employment release.

Out-of-sample backtest over 18 evaluation windows using the Dynamic Factor Model (DFM). Out-of-sample backtest over 18 evaluation windows using the Dynamic Factor Model (DFM). RMSE measures the typical forecast error in the same units as the series; 'naive' is a no-change benchmark. Unemployment (RMSE 0.54 vs 0.13 naive, n=15); Underemployment (RMSE 1.26 vs 0.50 naive, n=11); Male Unemployment (RMSE 0.44 vs 0.26 naive, n=11); Female Unemployment (RMSE 0.44 vs 0.28 naive, n=11).

Key Takeaways

• The latest INEGI productivity data for Q1 2026, released on May 13, indicates secondary sector output at 99.9, reflecting a decline of -0.632 from the previous month.
• Manufacturing composites show diverging trends, raising questions about sustainability in the sector.
• The top-performing subsectors are food and transport equipment, while energy continues to lag behind.

The latest INEGI productivity data for Q1 2026, released on May 13, indicates secondary sector output at 99.9, reflecting a decline of -0.632 from the previous month. INEGI's Q1 2026 productivity release shows secondary sector output at 99.9, down -0.632 from the previous month and around the 49th percentile historically. The construction sector is pulling down the overall index, while mining has posted modest gains recently. This mixed performance highlights a recovery that is not yet broad-based, leaving the economy vulnerable to external shocks.

Manufacturing composites show diverging trends, raising questions about sustainability in the sector. Across the PCA indices, productivity is at a critical juncture, with output declining by -0.223 recently, while sales have shown resilience with a small increase. However, labor demand remains weak, signaling potential sustainability concerns in the recovery. The disconnect between rising sales and stagnant labor demand could indicate that businesses are cautious about future hiring amid ongoing economic uncertainties.

The top-performing subsectors are food and transport equipment, while energy continues to lag behind. Within manufacturing, the food sector stands out with strong productivity gains, pushing the index to a record high, while transport equipment has also seen a notable increase. Conversely, the energy subsector remains a drag on overall performance, reflecting ongoing challenges. This concentration of growth in food underscores its critical role in stabilizing the manufacturing landscape amid broader economic headwinds.

Productivity trends reveal the economy's capacity to grow without stoking inflation. In Mexico, productivity in the secondary sector — mining, energy, construction, and especially manufacturing — signals how efficiently output expands relative to inputs. Strong productivity gains mean firms can meet demand without raising prices, easing inflation pressure and supporting sustainable wage growth. Weak productivity, by contrast, constrains supply, making cost shocks more inflationary. Manufacturing deserves closer scrutiny, as its diverse subsectors respond differently to global demand, exchange rate shifts, and investment cycles. Tracking these patterns helps judge whether growth is supported by efficiency gains or reliant on credit and labor cost increases.

Four composite indices — productivity, sales, inventory, and labor demand — are constructed using Principal Component Analysis (PCA) applied to INEGI manufacturing subsector data and GDP sector composition. PCA extracts the dominant co-movement pattern across subsectors, producing standardized indices that summarize broad trends while filtering out subsector-specific noise. The productivity index draws on output-per-worker measures across manufacturing branches; the sales, inventory, and labor demand indices use INEGI's corresponding survey-based indicators supplemented by GDP sector weights.

Key Takeaways

• The April 2026 SPF survey shows the aggregate Concern Index at 2.98, placing it in the 66th percentile, with a notable rise of 0.15 from the previous month.
• Economists have identified public insecurity as the top growth constraint, currently at 8.6%.
• The perceived probability of recession stands at 20.0%, which is elevated relative to historical norms, placing it in the 68th percentile.
• According to forecasters, the peso is viewed as overvalued, with a current-month misalignment of +0.101.

The April 2026 SPF survey shows the aggregate Concern Index at 2.98, placing it in the 66th percentile, with a notable rise of 0.15 from the previous month. The April 2026 SPF survey shows the aggregate Concern Index at 2.98, placing it in the 66th percentile, with a notable rise of 0.15 from the previous month. This uptick is significant as it reflects a growing sense of unease among economists, marking a two-month upward streak. With the index's recent rise, it suggests increasing vigilance on potential threats to economic stability, which could impact decision-making for both policymakers and investors.

Economists have identified public insecurity as the top growth constraint, currently at 8.6%. Economists have identified public insecurity as the top growth constraint, currently at 8.6%, followed closely by US trade policy at 7.1% and a lack of structural change at 4.7%. The most significant mover this month is public insecurity, which has decreased by 1.02% month-on-month. This shifting landscape indicates that concerns around security are still paramount, yet some optimism might be creeping into other areas, particularly trade policy, as it shows signs of stabilization.

The perceived probability of recession stands at 20.0%, which is elevated relative to historical norms, placing it in the 68th percentile. The perceived probability of recession stands at 20.0%, which is elevated relative to historical norms, placing it in the 68th percentile. This figure reflects a moderate concern compared to the previous quarter, suggesting that while the fears are present, they are not overwhelming at this moment. Looking ahead, the next quarter's probability of 24.5% indicates that economists are bracing for a potential uptick in recession fears as conditions evolve.

According to forecasters, the peso is viewed as overvalued, with a current-month misalignment of +0.101. According to forecasters, the peso is viewed as overvalued, with a current-month misalignment of +0.101. This suggests that the peso is weaker than expected, and the misalignment persists across future horizons, reinforcing the sentiment that economic pressures may continue to weigh on the currency. Such a perspective on FX expectations could influence monetary policy decisions, particularly as Banxico navigates this complex economic landscape.

Banxico's Survey of Professional Forecasters (Encuesta sobre las Expectativas de los Especialistas en Economía del Sector Privado) polls roughly 40 groups of analysts from banks, financial institutions, consultancies, and research centers. Responses are collected during the second half of each reference month — typically between the 15th and 28th — and results are published on the first business day of the following month. Because respondents form their expectations before some end-of-month official data releases, the survey provides an early window into shifting professional sentiment on inflation, growth constraints, recession risk, and exchange rates, making it a valuable leading indicator for policymakers and market participants.

Key Takeaways

• Banxico's May 2026 credit release shows money market spreads tightening as funding and TIIE rates hold steady against the policy rate.
• Household mortgage rates remain elevated, presenting a challenge for affordability while maintaining stability in the market.
• Debt issuance patterns show a stagnation in corporate financing as firms lean towards fixed-rate options.

Banxico's May 2026 credit release shows money market spreads tightening as funding and TIIE rates hold steady against the policy rate. Following the latest May lending data, rate premia indicate a narrowing trend, with the TIIE 28d at 0.26% and the TIIE 91d also remaining at 0.30%. This tightening reflects a shift in market sentiment, as investors recalibrate their expectations amid economic uncertainties. With the spread now at 0.193, we’re looking at levels not seen in over 21 years, hinting at a cautious optimism in liquidity conditions.

Household mortgage rates remain elevated, presenting a challenge for affordability while maintaining stability in the market. The total annual cost of mortgages (CAT) averages 13.9%, with a range from 10.7% to 28.2%. This steady level, combined with the current policy rate, underscores a limited pass-through effect, which could hinder potential homebuyers and weigh on consumer confidence. The unchanged mortgage costs suggest that while borrowers are facing higher expenses, the market is not seeing dramatic shifts in lending terms just yet.

Debt issuance patterns show a stagnation in corporate financing as firms lean towards fixed-rate options. Corporate financing trends reveal a preference for fixed-rate debt, which constitutes 18.74% of total issuance, while variable rates account for 19.92%. This balance indicates that firms are seeking stability in a volatile economic environment, opting to lock in rates rather than gamble on potential fluctuations. However, with the issuance index at a paltry 0, the overall appetite for new debt remains tepid, suggesting a cautious approach among businesses.

Rate premia show how market and bank funding costs move relative to the policy rate, indicating the efficiency of monetary transmission. Household mortgage rates capture the cost of long-term borrowing — their sharp rise in recent years signals affordability pressures and distributional effects, as many families face double-digit costs. Debt issuance patterns, normalized by GDP, reveal how firms finance themselves; the balance between fixed and variable rates matters for vulnerability to policy shifts. Together, these indicators show how policy rates filter into real borrowing conditions, affecting credit demand, investment, and ultimately growth and inflation dynamics.