Mexico economy beats forecasts in third quarter, cooling rate-cut pressure

Mexico's economy outperformed expectations in the third quarter, according to preliminary data released on Friday, indicating that growth in Latin America's second-largest economy is moderating and reducing the need for the central bank to cut interest rates at their upcoming meeting. Gross domestic product (GDP) grew by 0.9% in the July-to-September period, exceeding the 0.7% forecast in a Reuters poll of analysts, although it was slightly below the 1.4% growth seen in the previous quarter.

The figures are expected to reassure policymakers and investors that domestic demand is resilient despite the cooling growth. The central bank, known as Banxico, is scheduled to announce its latest policy decision next week. Financial experts stated that the stronger-than-anticipated performance weakens the argument for an immediate rate reduction, even if the economy's momentum is weakening.

Finance Minister Edgar Amador stated later that Mexico's economy could achieve growth near the upper limit of the government's forecast range of 1% to 2% in 2026 if the current momentum persists. Analyst Andres Abadia of Pantheon Macroeconomics emphasized that the data reinforced the expectation that Banxico would maintain its benchmark interest rate at 6.50% through the first half of 2027.

The services sector expanded by 1.1% and industry, encompassing manufacturing and construction, grew by 0.8% in the quarter. Meanwhile, primary sectors like agriculture and mining contracted by 0.4%. On an annual basis, the economy expanded by 3.2%, significantly surpassing economists' expectations of 2.5%. Banxico's communications at next week's meeting are anticipated to be less dovish than in September, according to analysts at Capital Economics.