Mexico’s economy rebounded more strongly than expected in the second quarter of 2026, recording broad gains across agriculture, industry and services after contracting during the opening three months of the year.

Gross domestic product increased 1.5% from the first quarter on a seasonally adjusted basis, the National Institute of Statistics and Geography, known as INEGI, said in its preliminary estimate released Thursday. The increase was the economy’s fastest quarterly expansion since the fourth quarter of 2020 and exceeded the approximately 1.3% gain anticipated by economists surveyed before the report.

The result reversed a 0.6% contraction in the first quarter and moved Mexico away from the immediate risk of a technical recession, commonly defined as two consecutive quarters of declining output. It also indicated that economic momentum strengthened substantially between April and June despite uncertainty over international trade, elevated financing costs and uneven investment.

All three of Mexico’s major economic groupings contributed to the expansion. Primary activities, including agriculture, livestock production, forestry, fishing and related extraction, increased 3.3% from the previous quarter. The sector benefited from a recovery following weather-related disruptions that had weighed on agricultural activity earlier in the year.

Secondary activities advanced 1.6%. That category encompasses manufacturing, construction, mining and utility production and is especially important for Mexico because of the country’s extensive integration into North American industrial supply chains. Government officials said manufacturing and construction helped support the increase, although the preliminary GDP release did not provide a complete industry-by-industry breakdown.

Tertiary activities, which include retail and wholesale trade, transportation, financial services, tourism, communications and other service industries, rose 1.5%. Services account for the largest share of the Mexican economy, making their acceleration a central component of the overall second-quarter rebound.

On a seasonally adjusted annual basis, GDP was 2.1% higher than in the second quarter of 2025. Using unadjusted figures, the economy expanded 2.2% from a year earlier, while cumulative growth during the first half of 2026 reached 1.2%. Primary activities posted the strongest annual performance, rising 7.6% on an unadjusted basis. Services grew 2.6%, while secondary activities increased 0.9%.

The distinction between the quarterly and annual measures is important. The headline 1.5% figure represents growth from the immediately preceding quarter, not an annualized growth rate. INEGI’s estimate is based on the statistical information available roughly 30 days after the quarter ends and may be revised when the full national accounts are published.

The broad sectoral expansion reinforced the government’s view that the economy recovered from an unusually weak start to the year. Mexico’s Finance Ministry described the second-quarter performance as solid and said the 1.5% increase reflected generalized momentum among the major areas of economic activity.

Finance Secretary Édgar Amador Zamora said primary production recovered from earlier climatic disruptions, while manufacturing and construction supported industry. Wholesale commerce and activities tied to domestic consumption contributed to services growth, according to the ministry’s assessment.

Household demand has remained an important stabilizing force. Social transfers, increases in the minimum wage and government welfare spending have supported disposable income, helping consumption withstand slower employment growth and restrictive borrowing conditions. The Finance Ministry said federal social-development expenditure rose 9.7% in real terms during the first half, with education spending increasing 13.5% and social-protection spending rising 6.1%.

Tax receipts also suggested that domestic activity remained resilient. The ministry reported that value-added tax revenue increased 10.6% in real terms from a year earlier during the first six months, its strongest first-half growth since 2014. Nonfuel excise-tax receipts rose 9.1%, while taxes connected with imports increased 6.4%.

Mexico also received a temporary demand boost from its role as a co-host of the 2026 FIFA World Cup with the United States and Canada. Matches beginning in June increased travel, lodging, restaurant, transportation and recreational activity in host cities, while preparations for the tournament supported some construction and commercial spending before the event.

The size of that contribution cannot yet be isolated from the preliminary GDP figures. Economists have cautioned, however, that some tourism and consumption activity may not carry into subsequent quarters. Output in accommodation, retail, entertainment and related services could normalize after the tournament, creating a more difficult comparison during the second half.

That possibility has made the composition of growth as important as the headline figure. A rebound driven by household consumption, temporary events and the recovery of weather-sensitive industries may prove less durable than one supported by sustained gains in productive investment, exports and business formation.

Private and public investment have remained comparatively weak. Analysts have pointed to policy uncertainty, infrastructure constraints and questions surrounding the future treatment of foreign capital in strategic industries as factors delaying commitments. Mexico’s exposure to changes in United States tariff policy has also complicated investment decisions in manufacturing, particularly in automobiles, metals and other export-oriented sectors.

The scheduled review of the United States-Mexico-Canada Agreement is another source of uncertainty. Mexico relies heavily on the United States as its largest export destination, and production networks in vehicles, electronics, machinery, medical devices and consumer goods span both sides of the border. Changes to regional content requirements, tariffs or enforcement could affect investment plans and industrial output well beyond the tradeable-goods sector.

At the same time, Mexico continues to attract manufacturing activity linked to nearshoring and the expansion of North American technology infrastructure. Production of computer servers and other equipment used by artificial-intelligence data centers has become an increasingly significant component of exports. That activity has provided support to selected manufacturing centers, though highly automated production and imported components can limit the immediate effect on employment and domestic value added.

The government has sought to convert the nearshoring trend into broader investment through Plan México, an industrial strategy designed to increase domestic production, shorten administrative procedures and coordinate public and private infrastructure projects. Energy availability, transport capacity, water supply and regulatory predictability remain critical to determining whether announced projects translate into sustained capital formation.

Mexico’s public finances provide only limited room for a large fiscal stimulus. The Finance Ministry nevertheless said first-half fiscal balances were better than budgeted and maintained that public debt remained sustainable at approximately 51% of GDP. Higher tax collection and stronger oil-related revenue helped support the fiscal position during the period.

Oil revenue increased 30% in real annual terms in June, according to the ministry, benefiting from higher international petroleum prices. That result marked a third consecutive monthly increase and lifted first-half oil revenue by 2.1% from a year earlier. Revenue generated by the state electricity company, Comisión Federal de Electricidad, rose 1.6%.

The ministry also reported that foreign direct investment reached a first-quarter record of $23.6 billion, 10.4% higher than a year earlier. The figure indicated continued foreign interest in Mexico, although headline foreign-investment totals can include reinvested earnings and transactions that do not immediately correspond to new factories or equipment.

Financial-market conditions improved toward the end of the quarter as global risk appetite strengthened. The peso appreciated 2.6% against the United States dollar in June, the Finance Ministry said. Currency movements remain sensitive to expectations for United States monetary policy, energy prices, trade negotiations and Mexico’s domestic interest-rate outlook.

The stronger GDP report could affect expectations for Banco de México. The central bank held its overnight interbank interest-rate target at 6.50% on June 25 after a series of earlier reductions. At that meeting, policymakers said the economy was expected to expand during the second quarter after contracting in the first, but they continued to identify significant downside risks to activity.

Banco de México also said inflation risks remained tilted to the upside, citing trade disruptions, geopolitical conflicts, persistent core inflation, climate-related effects and cost pressures. Although the central bank had observed an easing of headline inflation during the early part of the quarter, it maintained a restrictive policy stance while assessing the durability of disinflation.

A stronger-than-anticipated economy can make additional rate cuts less urgent because it reduces concern that restrictive monetary policy will cause a deep downturn. It may also increase attention to demand-related inflation pressures. The central bank’s next decisions will depend on subsequent inflation readings, wage developments, exchange-rate conditions and whether the second-quarter growth surge is sustained.

Government and private-sector forecasts remain divided. The Finance Ministry expects the economy to grow between 1.8% and 2.8% in 2026. That range is more optimistic than several external projections, including forecasts near 1.1% from private-sector economists and Banco de México and approximately 1.2% from the International Monetary Fund.

The latest GDP result makes the lower end of the government’s range more attainable, but it does not guarantee that annual growth will reach 1.8%. Because output contracted in the first quarter, the economy would still require continued expansion during the second half. A renewed quarterly decline after the temporary second-quarter boost would narrow the gap between official and private forecasts.

Officials have argued that the stronger April-to-June performance creates a favorable statistical base. The Finance Ministry said annual growth of about 1.5% could be achieved unless economic activity contracts during both remaining quarters. That assessment underscores the importance of the trajectory rather than any single quarterly reading.

Risks remain concentrated in investment, trade and external demand. Slower United States growth would affect Mexican exports, remittances and tourism. Additional tariff measures could disrupt supply chains, while elevated energy costs and geopolitical tensions could raise inflation and production expenses. Domestically, weaker job creation or a decline in real household income could reduce the consumption that supported the first-half economy.

There are also potential sources of upside. A continued expansion in high-value manufacturing, faster execution of infrastructure projects and greater private participation in energy development could extend the industrial rebound. Lower inflation could permit gradual monetary easing, reducing financing costs for households and companies without destabilizing the peso.

The second-quarter estimate therefore marks a significant improvement but not a definitive shift to a high-growth path. Mexico has demonstrated that its economy can respond strongly when agriculture normalizes, industry accelerates and consumer-facing services receive additional demand. The next test is whether those gains are followed by sustained investment and productivity growth after temporary supports fade.

INEGI is scheduled to release the complete second-quarter national accounts on August 24. That publication will replace the preliminary estimate and provide more detailed information on individual industries. Revisions could alter the reported growth rates, although the initial figures establish that Mexico entered the second half of 2026 with considerably more momentum than it had at the end of March.