Mexico’s Construction Sector Struggles Amid Industrial Contraction and Weakened Public Works

For 2024, Mexico’s construction sector presents a mixed picture: employment, wages, and investment show strength and resilience, while production—especially in public works and civil engineering—has softened significantly.

Labor and Investment Trends: The sector generated 586,000 new jobs in 2024, a YoY increase of 2.1%, and total hours worked rose 0.9%. Wages increased sharply—remunerations paid by construction companies rose 14.3%—and fixed asset investment within the sector grew 4.4%, driven in large part by machinery and equipment purchases. Machinery and equipment made up 51.9% of fixed assets, and together with real estate assets accounted for over 73% of fixed capital in the sector.

Subsector Performance Diverged: Edification (building) and Specialized Construction Works emerged as bright spots, with production growing 5.2% and 6.7% respectively in 2024. Civil Engineering Works, however, declined sharply by 7.6% YoY and remains the dominant subsector by production share (≈ 46.6%). The production shrinkage in civil engineering translates into larger spillovers for industrial activity and infrastructure-dependent segments.

Macro-Industrial Weakness: INEGI’s Monthly Indicator of Industrial Activity (IMAI) shows that overall industrial output contracted by 2.4% YoY in December 2024, with construction being the worst performer: 7.1% YoY and 2.1% MoM declines. Civil engineering subsector output plunged roughly 33–34%. These drops contributed materially to a weak Q4; GDP contracted sequentially in Q4 2024 by roughly 0.6%, and full-year GDP growth was around 1.2%.

Structural Shifts & Strategic Implications: The divergence between civil engineering and private building suggests that government infrastructure spending has tapered off and private sector, housing, and specialized construction are carrying more weight. The surge in wages and investment in capital suggests firms are still preparing for future scale and technological modernization, possibly anticipating new public works in 2026 or policy changes. Female participation (16.6% of construction workforce) and higher training coverage (45.1%) are positive signs for inclusion and human capital, but likely insufficient to offset declining demand in infrastructure.

Open Questions: Will the decline in civil engineering output reverse with renewed public infrastructure investment? How sustainable is construction employment growth given contracting output and formal sector employment softening elsewhere? What policy levers (fiscal stimulus, public-private partnerships, regulatory changes) will be deployed to address the infrastructure gap? How much of wage growth reflects inflation rather than real income gains?