Understanding Mexico's economic landscape via data transformations

Key Takeaways

• The latest SHF House Price Index for Q3 2025 reveals a YoY inflation rate of 8.86%, which is about as spicy as a taco on a hot summer day.
• Now, let’s unravel the mystery of the DFM nowcast, which brings some intriguing twists to our house price saga.
• Housing is a major household asset and a key store of wealth.

The latest SHF House Price Index for Q3 2025 reveals a YoY inflation rate of 8.86%, which is about as spicy as a taco on a hot summer day. This inflation rate, reported on July 1, 2025, is comfortably above the historical average, strutting in at the 79th percentile since 2006. In the same breath, house price inflation is outpacing both the headline CPI at 3.69% and the housing CPI at 3.35%, creating a premium of over 5 percentage points in each case. Meanwhile, the DFM nowcast suggests a slight divergence from this observed rate, but let's not throw a piñata just yet; we’ll dig into that shortly.

Now, let’s unravel the mystery of the DFM nowcast, which brings some intriguing twists to our house price saga. The DFM nowcast, standing at 7.29% as of January 1, 2026, is lower than the observed 8.86%, indicating that the model detects downward pressure from auxiliary indicators like mortgage lending and CPI housing. This suggests that while house prices have been on a rollercoaster of inflation, the underlying trend is showing signs of mean reversion or cooling off, which could have implications for those still clinging to the idea of a housing bonanza. In short, the DFM is waving a caution flag, reminding us that even the hottest markets can cool down faster than a soggy tortilla.

Housing is a major household asset and a key store of wealth. Rising prices can lift balance sheets and collateral values, while falling prices can weaken credit conditions and confidence. Housing costs also shape the cost of living and affordability, making house price inflation relevant for both growth and distributional pressures in Mexico.

Key Takeaways

• Brent oil prices through December 2025 reveal a disconcerting tale, settling at $61.81, a staggering 15.6% decline year-over-year.
• Copper, on the other hand, shines like a beacon, currently priced at $11,790.96 and boasting a robust 32.3% increase over the past year.
• Corn prices are on a modest ascent, currently at $205.32, with a year-over-year rise of 1.2%.
• Commodity prices feed directly into Mexico's inflation pulse and terms of trade.

Brent oil prices through December 2025 reveal a disconcerting tale, settling at $61.81, a staggering 15.6% decline year-over-year. Brent oil prices through December 2025 reveal a disconcerting tale, settling at $61.81, a staggering 15.6% decline year-over-year. This downward trajectory, exacerbated by global supply chain disruptions and fluctuating demand, has cast a pall over Mexico's federal revenues, which hinge significantly on oil exports. With a three-day streak of decline, the implications for Pemex and the Campeche regional economy are as clear as a foggy morning: uncertainty looms large.

Copper, on the other hand, shines like a beacon, currently priced at $11,790.96 and boasting a robust 32.3% increase over the past year. Copper, on the other hand, shines like a beacon, currently priced at $11,790.96 and boasting a robust 32.3% increase over the past year. This metal's recent upward momentum—evident in a 9.1% monthly increase—reflects a burgeoning demand from the tech sector and a resurgence in global infrastructure projects. For Mexico's mining sector, particularly in Sonora, this trend offers a silver lining amidst the otherwise turbulent commodity seas.

Corn prices are on a modest ascent, currently at $205.32, with a year-over-year rise of 1.2%. Corn prices are on a modest ascent, currently at $205.32, with a year-over-year rise of 1.2%. This gentle rise, marked by a 1.8% increase in the last month, paints a picture of stability in an otherwise volatile agricultural landscape. For Mexico's 1.5 million smallholder farmers, this incremental growth brings hope, but the specter of food price inflation still lurks in the shadows.

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 December 2025 IMSS release shows unit labor costs at 3.89%, reflecting a rise in wages outpacing productivity.
• Real wages in the formal sector continue to show positive growth, signaling improved purchasing power for workers.
• Across sectors, manufacturing and retail diverge in their labor cost dynamics, with manufacturing showing stronger wage growth.
• 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.

The December 2025 IMSS release shows unit labor costs at 3.89%, reflecting a rise in wages outpacing productivity. Following December's formal sector wage data, ULC in manufacturing is climbing, indicating that wages are growing faster than productivity. This latest figure is in the 80th percentile and marks a month-over-month decline of 1.01 percentage points. It suggests that businesses might face cost-push inflation pressures, which could squeeze profit margins and affect competitiveness down the line.

Real wages in the formal sector continue to show positive growth, signaling improved purchasing power for workers. Manufacturing real wages are currently up by 3.29%, while retail real wages are slightly higher at 3.77%. Even though both sectors are experiencing gains, the decline in growth rates compared to previous months indicates that households may be feeling a pinch, as the overall growth is slowing. However, the fact that purchasing power is still on the rise is a silver lining for households navigating through economic uncertainties.

Across sectors, manufacturing and retail diverge in their labor cost dynamics, with manufacturing showing stronger wage growth. Manufacturing is currently outperforming retail in terms of unit labor costs, which are rising faster than those in the retail sector. This divergence suggests that while consumers in retail may be enjoying a bit of wage growth, manufacturers are grappling with heightened labor costs that could impact their pricing strategies. Retail, on the other hand, is lagging behind, with ULC growth remaining more subdued at 3.56%.

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.

Key Takeaways

• The December 2025 ENOE survey shows unemployment at 3.28%, nudging up slightly from the previous month.
• By gender, unemployment rates reveal a notable consistency, though slightly higher for women.
• Informal employment continues its downward trend, signaling a shift in the labor landscape.
• Unemployment spells are lengthening slightly, hinting at lingering difficulties for job seekers.

The December 2025 ENOE survey shows unemployment at 3.28%, nudging up slightly from the previous month. The December 2025 ENOE survey shows unemployment at 3.28%, which is about the 33rd percentile historically. This marks a modest increase of 0.025 from November, continuing an upward trend observed over the last two months, with a total rise of 0.106. These developments come amid a rising tide of uncertainty in the U.S. economy, as highlighted by Wall Street's recent dips in response to concerns over inflation and potential rate adjustments from the Fed.

By gender, unemployment rates reveal a notable consistency, though slightly higher for women. Male and female unemployment rates are at 3.37% and 3.55%, respectively, both reflecting no change from the previous month. Despite this stability, the fact that women's unemployment remains marginally higher suggests a potential area of concern as the labor market navigates these uncertain waters.

Informal employment continues its downward trend, signaling a shift in the labor landscape. The share of informal workers stands at 27.8%, having fallen by 0.0258 from the previous month. This 6-month streak of decline, which totals a reduction of 0.295, could indicate a gradual formalization of the labor market, albeit amidst the broader economic challenges.

Unemployment spells are lengthening slightly, hinting at lingering difficulties for job seekers. The average duration of unemployment now sits at 1.87 months, showing an increase of 0.161 from the last quarter. This uptick, while not alarming, suggests that those out of work are finding it increasingly challenging to secure new positions, contributing to a sense of prolonged difficulty in the market.

Among the unemployed, educational attainment is shifting, reflecting a worrying trend. The educational mix of job seekers shows an increase in the proportion of those with no education, now at 3.51%. This rise, although modest, highlights potential vulnerabilities in the labor market, particularly as the job landscape evolves and requires more skilled workers.

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; longer unemployment durations and weaker prospects for the more-educated raise scarring risks and damp wage growth. 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.

Key Takeaways

• INEGI's Q4 2025 productivity release shows secondary sector output at 102, continuing its recent upward trend.
• Across the PCA indices, manufacturing composites show a concerning divergence in performance.
• Within manufacturing, the top-performing subsectors shine a spotlight on food production, while transport equipment remains in the dumps.
• Productivity trends reveal the economy's capacity to grow without stoking inflation.

INEGI's Q4 2025 productivity release shows secondary sector output at 102, continuing its recent upward trend. The latest INEGI productivity data for Q4 2025, released in December, indicates that the secondary sector productivity index is at 102, reflecting a 3-month upward streak. This growth is largely driven by construction, which has soared to an impressive 106, while mining continues to lag behind at a mere 89.8. Notably, this growth seems to be more concentrated in construction rather than being broad-based across all industries, hinting that while some sectors are thriving, others are still digging themselves out of a hole.

Across the PCA indices, manufacturing composites show a concerning divergence in performance. The composite indices reveal a mixed bag: while productivity is at a modest 0.281, sales have been robust, rising to 0.61, suggesting that demand is still alive and kicking. However, labor demand is on a downward trajectory at -1.49, raising eyebrows about the sustainability of this growth. This divergence between sales and labor demand could signal future challenges—because let’s face it, if the demand is there but the workforce isn’t, we might just be throwing a party with no one to serve the drinks.

Within manufacturing, the top-performing subsectors shine a spotlight on food production, while transport equipment remains in the dumps. The top-performing subsectors include food, which is cruising at 111, a solid indicator of consumer demand, while transport equipment languishes at a dismal 82, reflecting ongoing struggles in that area. Given that food accounts for 18.86% of total manufacturing, its strong performance is undoubtedly propping up the overall figures. Meanwhile, the stark contrast with transport equipment underscores the uneven recovery within the manufacturing landscape—it's like a feast where some are dining lavishly while others are still waiting for their plates.

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.

Key Takeaways

• The January 2026 SPF survey shows the aggregate Concern Index at 2.83, reflecting a dip from last month.
• Economists have identified public insecurity as the leading constraint on growth, with a notable uptick in concerns over U.S.
• The perceived probability of recession stands at 25.0%, marking a moderate level of concern relative to historical norms.
• According to forecasters, the peso is viewed as overvalued, indicating a persistent misalignment in expectations.

The January 2026 SPF survey shows the aggregate Concern Index at 2.83, reflecting a dip from last month. The January 2026 SPF survey shows the aggregate Concern Index at 2.83, placing it around the 64th percentile. This index is falling, down by 0.06 from December. It's worth noting, though, that over the past year, concerns have crept up by 0.55, indicating a growing unease among economists despite this recent dip.

Economists have identified public insecurity as the leading constraint on growth, with a notable uptick in concerns over U.S. The key constraints currently cited include public insecurity at 10.1%, U.S. trade policy at 8.4%, and a lack of structural change at 4.2%. The single biggest mover this month is public insecurity, which saw a rise of 1.53 percentage points. This growing concern reflects broader anxieties about safety and stability, which could weigh heavily on economic confidence.

The perceived probability of recession stands at 25.0%, marking a moderate level of concern relative to historical norms. Recession concerns among surveyed economists are currently moderate, reflecting a 25.0% probability compared to the previous quarter. This signals a bit of unease, especially given the elevated standing relative to historical averages. Looking ahead, the probability eases to 15.0% for the next quarter, suggesting some confidence that the economy might stabilize in the near term.

According to forecasters, the peso is viewed as overvalued, indicating a persistent misalignment in expectations. FX expectations suggest the peso is overvalued, with a current-month misalignment of +0.205. This perception has been consistent across the forecast horizon, indicating a sustained belief that the peso is weaker than anticipated. Such misalignment might prompt policymakers to reconsider interventions to stabilize the currency.

Banxico's Survey of Professional Forecasters (Encuesta sobre las Expectativas de los Especialistas en Economía del Sector Privado) polls economists from major financial institutions, consultancies, and research centers. Published monthly, it captures expert views on growth constraints, inflation expectations, and recession risks before official data confirm trends. Because these respondents shape market narratives and influence investment decisions, the survey offers an early window into shifting professional sentiment — making it a valuable leading indicator for policymakers and market participants alike.

Key Takeaways

• Banxico's February 2026 credit release shows money market spreads at a mere 0.19%, signaling a tightening trend in rate premia.
• Household mortgage rates reflect a landscape of escalating costs, with the total annual cost (CAT) averaging an eye-watering 14%.
• Debt issuance patterns show a distinct tilt towards fixed-rate financing, with firms increasingly seeking stability in an uncertain economic climate.
• Rate premia show how market and bank funding costs move relative to the policy rate, indicating the efficiency of monetary transmission.

Banxico's February 2026 credit release shows money market spreads at a mere 0.19%, signaling a tightening trend in rate premia. Following the latest February lending data, rate premia have contracted dramatically, with ON TIIE funding remaining at a negligible 0.00% and TIIE 28d at a modest 0.26%. This month, the spread narrowed by 0.108%, a tangible harbinger of liquidity's tightening grip. The narrowing of the spread, now at the 6th percentile historically, suggests a retreat into the safety of more stable funding avenues as market participants brace for potential shifts in monetary policy.

Household mortgage rates reflect a landscape of escalating costs, with the total annual cost (CAT) averaging an eye-watering 14%. The latest figures reveal a CAT range stretching from 11.1% to 28.2%, presenting a dual-edged sword for affordability. As the policy rate continues to exert pressure, the implications for potential homebuyers become stark—financial constraints may loom larger, dampening the enthusiasm for new mortgages amidst tightening economic conditions.

Debt issuance patterns show a distinct tilt towards fixed-rate financing, with firms increasingly seeking stability in an uncertain economic climate. The composition of corporate debt now reveals fixed rate instruments commanding 19.79% of GDP, while variable rates languish at 10.28%. This shift signals a strategic pivot among firms, likely in response to prevailing interest rate uncertainties, as they seek to hedge against future fluctuations and secure more predictable financing amid a backdrop of evolving monetary policy.

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.