Mexico’s manufacturing sector continued to show signs of strain in October, as business confidence slipped to 49.1, down from 49.4 in September, according to the latest data from the National Institute of Statistics and Geography (INEGI). The reading — its eighth consecutive month below the neutral 50-point threshold — signals that industrial sentiment remains in contraction territory amid soft investment trends and broader economic uncertainty.

Investment Pessimism Deepens

Manufacturers reported a sharper decline in confidence surrounding the appropriate moment to invest, which dropped 0.8 points to 36.9, its lowest since mid-2024. This persistent caution reflects both tight financial conditions and concerns over external demand, particularly as global manufacturing activity slows.

“Manufacturers are in a holding pattern,” said Luis Robles, senior economist at BBVA México. “They’re seeing relatively stable domestic orders, but high borrowing costs and policy uncertainty are keeping investment decisions on ice.”

Confidence in the current national economic situation also deteriorated, falling 0.6 points to 48.7, as firms cited sluggish growth and weaker export activity to the United States — Mexico’s largest trading partner — as key drags.

Outlook Remains Muted Despite Company-Level Stability

While sentiment toward the company’s own economic situation eased slightly to 50.6, it remains above the national average, suggesting that firms still see resilience within their operations despite broader headwinds. Expectations for the company’s future performance were unchanged at 56.3, indicating cautious optimism that demand could stabilize heading into 2026.

However, optimism about the future national economy softened by 0.5 points to 52.1, suggesting businesses expect the broader recovery to remain uneven. Year-over-year, overall business confidence is down 3.1 points, signaling that the sector’s recovery momentum continues to fade.

Historical Context: A Downturn Within Range

Mexico’s business confidence index has historically averaged 51.7 points since 2004, according to INEGI data. The October reading of 49.1 is consistent with a mild contraction phase, but well above the record low of 33.9 recorded during the global financial crisis in February 2009. The index last reached its all-time high of 59.6 in February 2007.

“Mexico’s industrial base has weathered cycles before, but this current stretch of sub-50 readings points to structural caution rather than panic,” said María Torres, an analyst at Banco Intercam. “Firms are waiting for clear fiscal and trade signals before committing to new investment rounds.”

Broader Economic Implications

The sustained weakness in manufacturing confidence poses a challenge for Mexico’s post-pandemic growth trajectory, especially as the country positions itself to benefit from nearshoring trends and U.S. industrial reconfiguration.

Analysts note that the peso’s recent volatility, coupled with slower-than-expected infrastructure spending, may be dampening the optimism that followed the surge in foreign investment earlier this year.

Still, the medium-term outlook remains constructive, with many firms citing expectations of stronger U.S. demand in 2026 and potential policy support following next year’s general elections.

“Confidence may be low today, but the groundwork for a manufacturing rebound is there,” Robles said. “Mexico remains an attractive hub for supply chain diversification — the question is how quickly sentiment can catch up.”