IMEF indicators confirm Mexico's economy reaches mid-2026 with no recovery in sight
May data reflect the persistence of weak industrial activity and a stagnant services sector that find no catalysts to reverse their trend.
Markets and Stocks
US indices are pointing to a largely unchanged open with a marginally negative bias, pausing an eight-session consecutive run of advances, as the market digests a series of corporate news in the technology sector. Brent sheds 1.2% after its largest single-day rise in a month on Monday, with Trump reiterating optimism about a deal next week despite Iran threatening to suspend talks due to Israel's escalation in Lebanon — a partial Hezbollah-Israel truce was announced Monday though fighting in the south continues. The 10-year Treasury yield holds near 4.43%. The day's catalysts will be the April JOLTS job openings data, comments from Cleveland Fed President Beth Hammack, and testimony from Marco Rubio before four congressional committees on the state of negotiations with Iran and the Trump administration's foreign policy. Thursday formally begins SpaceX's IPO marketing with pricing anticipated for June 11.
Monitor
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7,597
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30,532
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50,885
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68,281
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Monedas / FX (Foreign Exchange)
USD/MXN
17.2774
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20.1187
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1.165
0.20%
Índice DXY
99.09
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4.02
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Treasury 10 años
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6.51
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9.13
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Petróleo (Brent)
94.00
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Oro
4,521
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Key points
May Banxico Survey: less economic growth, more inflation, and overnight rate unchanged through 2027.
Trump seeks to prevent Israel's Lebanon offensive from derailing Iran deal.
Inflation rises again in the Eurozone, reaching 3.2% annually in May.
The United States proposes 25% tariffs on Brazil for "unfair" trade practices.
In the US, JOLTS job openings will be released at 8am.
For the rest of the day, the interbank exchange rate (pesos per dollar) could trade between $17.22–$17.35 spot.
What you need to know about the economy and markets
The May IMEF indicators confirmed the weakness of economic activity in Mexico, with both components remaining in contraction territory. The manufacturing indicator retreated to 48.5 points from 49.0 in April, accumulating 26 consecutive months below the expansion threshold, while the non-manufacturing indicator (covering trade and services) stood at 48.7 points, also in contractionary territory. Taken together, the results reflect a low-dynamism environment, with retreats in production, new orders, and employment, and without the occasional improvements in some sub-components being sufficient to reverse the general weakness trend.
Our Take
The IMEF data reinforce the narrative of an economy going through a phase of weak growth with difficulty regaining traction in the short term. The persistence of both indicators in contraction territory suggests that the activity bias remains to the downside, in line with downward revisions to growth expectations. Going forward, there is still insufficient evidence to anticipate a sustained recovery, meaning the balance of risks for economic activity remains deteriorated.
The May Banxico expectations survey showed that analysts reduced their 2026 GDP growth forecast to 1.10% from a prior estimate of 1.40%. These revisions come after the confirmed GDP contraction of 0.6% in the first quarter. On prices, specialists slightly adjusted downward their headline inflation expectation for end-2026 to 4.35% from 4.38%, though for 2027 they raised it to 3.84% from 3.80%, remaining in both cases well above the central bank's 3% target. On the benchmark interest rate, consensus places it at 6.50% for both end-2026 and end-2027.
Our Take
The May Banxico survey can be summarized as follows: analysts expect less economic growth, with the fifth consecutive downward revision; more inflation, remaining distant from Banxico's target and failing to converge to 3.0% throughout 2027; and an overnight rate unchanged, at least for the rest of 2026 and into 2027.
Investors are grappling with contradictory signals in the conflict between the United States and Iran, particularly following a report published yesterday indicating that Tehran had stopped communicating with the US through mediators, alleging that the ceasefire had been violated as a result of Israel's operations in Lebanon. However, US President Donald Trump stated that talks were ongoing and that he expected to reach a deal with Tehran next week.
Our Take
Peace has still not consolidated and geopolitical risk at times weighs again on financial assets. The market remains very cautious because the talks between the United States and Iran still do not guarantee a real de-escalation. The stalling of negotiations stokes fears that rising energy costs will drive inflation and force the Federal Reserve to keep interest rates higher for longer.
The rise in energy costs as a consequence of the war in the Middle East has accelerated Eurozone inflation. In May, the Consumer Price Index (CPI) stands at 3.2%, up from 3.0% in April, according to the preliminary estimate published by Eurostat. The figure puts more pressure on the European Central Bank (ECB) ahead of its meeting next week. Eurozone inflation has thus surpassed 3% for the first time in more than two and a half years, also representing its highest level since September 2023. Meanwhile, core inflation rebounded to 2.5% from 2.2% in April.
Our Take
May's data show headline inflation continuing above the ECB's 2% target and an acceleration in core inflation, an indicator the institution pays particular attention to when assessing underlying price trends. With the war in the Middle East entering its fourth month, the energy price crisis has become more permanent. With these data, the ECB is likely to announce a 25 basis point hike in its benchmark rates when it meets on June 11.
The US government continues to expand its trade fronts. The Office of the US Trade Representative (USTR) has proposed the imposition of 25% tariffs on Brazilian products after concluding that certain practices of the South American country are unreasonable and restrict or harm US trade. The Section 301 investigation also addresses issues related to anti-corruption, intellectual property protection, ethanol market access, and illegal deforestation.
Our Take
The initiative represents a new episode in trade tensions between Washington and Brazil. In July 2025, the Trump administration already imposed 50% tariffs on Brazilian products, a decision interpreted in part as retaliation for the legal proceedings opened against former President Jair Bolsonaro. However, those measures were struck down by the US Supreme Court in February of this year, leaving in effect only the global 10% tariff applied to Brazilian exports to the US market.
Corporate News
Anthropic announced Monday that it confidentially filed its IPO application with the SEC, without specifying price or number of shares, according to a company statement. According to Bloomberg reports, the transaction would seek to raise approximately US$60 billion at a valuation close to one trillion dollars, which would make it the second-largest IPO in history after SpaceX. The company anticipates its first profitable quarter. Goldman Sachs, JPMorgan, and Morgan Stanley are under consideration for key roles in the placement. Meanwhile, OpenAI is preparing its own filing in the coming weeks, though CEO Sam Altman downplayed the race narrative with Anthropic.
Alphabet announced an US$80 billion equity financing package composed of three instruments: a US$40 billion open-market share sale program to be executed during the third quarter, a US$30 billion underwritten offering of common and convertible preferred shares, and a US$10 billion private placement with Berkshire Hathaway, according to Bloomberg reports. The company indicated the funds will finance its AI infrastructure expansion, with CFO Anat Ashkenazi having previously indicated that 2027 capex would be significantly higher than the US$190 billion budgeted for 2026.
The to-do list
At 8am, follow the April JOLTS job openings data and watch Marco Rubio's congressional testimony on the state of negotiations with Iran.
Monitor any signal from Tehran: Iran threatened to suspend talks due to Israel's escalation in Lebanon, but Trump says he expects a deal next week.
Tonight, try making shrimp aguachile at home, fresh, quick, and perfect for the June heat in Mexico City.
Go for a walk, run, or bike ride, a breath of fresh air is welcome to balance out office days.
Today's quote…
"Clarity doesn't come from having all the answers, but from asking the right questions."
— Warren Berger
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Guillermo Quechol gquechol@kapital.com
Nahely Suasnavar nsuasnavara@kapital.com
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