MARTIN ARMSTRONG: [Mexico] maintains a younger labor force than Europe, Japan, South Korea, or even China, while remaining deeply connected to the largest consumer economy on earth.

"Mexicans Are Feeling the Economy Grow in Real Time," Martin Armstrong, Armstrong Economics, May 9, 2026.

Mexico recently attracted more than $36 billion in foreign direct investment while exports surpassed $600 billion annually, making the country one of the largest manufacturing exporters in the world.

Mexico is increasingly benefiting from one of the largest supply chain realignments in modern economic history. Factories are expanding, industrial wages are rising, foreign investment is pouring in, and millions of Mexicans are experiencing growing economic opportunity in real time as capital shifts closer to the United States.

Mexico’s economy is being transformed by nearshoring. For decades corporations concentrated production heavily inside China to maximize cheap labor and globalization efficiencies. Now companies want manufacturing closer to the American market because of geopolitical tensions, shipping disruptions, rising Chinese labor costs, and growing concerns over supply chain security. Mexico sits directly at the center of that transition because it already possesses deep trade integration with the United States through the USMCA framework.

Mexico recently attracted more than $36 billion in foreign direct investment while exports surpassed $600 billion annually, making the country one of the largest manufacturing exporters in the world. Industrial hubs throughout northern Mexico are expanding rapidly as companies tied to automotive production, electronics, aerospace, semiconductors, logistics, and industrial manufacturing continue relocating operations closer to the United States.

Entire regions are being reshaped economically. Industrial construction across northern Mexico surged dramatically as warehouse space, factories, rail infrastructure, and logistics centers expand around Monterrey, Ciudad Juárez, Tijuana, Saltillo, and other manufacturing corridors. Demand became so strong in some industrial zones that vacancy rates reportedly fell below 1–2% while industrial rents climbed sharply due to limited available space.

This is real economic activity, not simply financial engineering. Automobile manufacturing remains one of the clearest examples. Mexico now produces more than 4 million vehicles annually and has become one of the world’s largest auto exporters. Companies including Tesla suppliers, BMW, Kia, Toyota, General Motors, and numerous parts manufacturers continue investing billions into Mexican production capacity as North American supply chains deepen further.

Industrial wages are rising alongside the expansion. Manufacturing pay in many regions increased materially over recent years while unemployment remains relatively low in major industrial corridors. Middle-class growth has accelerated in parts of northern and central Mexico as higher-paying industrial jobs expand outward into logistics, engineering, construction, technology, transportation, and consumer spending sectors.

The younger generation increasingly sees opportunity connected directly to this industrial expansion cycle. That psychological shift matters enormously because confidence drives consumption, entrepreneurship, and long-term investment behavior. In many Western countries, younger generations increasingly feel locked out of housing, overwhelmed by debt, or trapped under declining purchasing power. In parts of Mexico, rising industrial activity is creating upward mobility tied directly to production growth and capital inflows.

The peso itself became one of the strongest-performing currencies globally recently, strengthening materially against the dollar while many developed-world currencies weakened. That stability helped contain imported inflation pressures relative to many Western economies struggling with currency deterioration and energy shocks.  

Mexico also benefits from demographics at a time when much of the developed world faces aging population crises. The country maintains a younger labor force than Europe, Japan, South Korea, or even China, while remaining deeply connected to the largest consumer economy on earth.

Mexico is not rising because governments suddenly became brilliant. Mexico is rising because global capital is repositioning itself geographically. The United States remains the primary destination for international capital during periods of global instability, and Mexico increasingly benefits secondarily because corporations want production integrated directly with American markets.

None of this means Mexico lacks problems. Cartel violence remains a serious issue in portions of the country. Infrastructure bottlenecks still exist. Water shortages threaten some industrial regions. Wealth inequality remains significant and parts of southern Mexico continue lagging economically behind the industrial north.

While Europe increasingly deindustrializes itself through energy policy and overregulation, Mexico is industrializing further through manufacturing expansion and trade integration. That distinction is becoming increasingly important globally.

The world economy is fragmenting into regions attracting capital and regions repelling it. Mexico is increasingly landing on the receiving side of those flows because geography, labor costs, demographics, and industrial integration with the United States create advantages that corporations cannot ignore. That is why millions of Mexicans are increasingly feeling economic momentum build around them in real-time.

The Fed will increase the pace at which it’s pulling back its support for the COVID economy

From Martin Armstrong.

I have been warning that the Federal Reserve is the last independent central bank and despite all the hatred hurled at it from primarily the goldbugs, the real picture is starting to surface if anyone cares to look objectively. The Fed will increase the pace at which it’s pulling back its support for the COVID economy as inflation surges. Powell has said that he expects to raise interest rates three times next year in 2022 which is really a MAJOR departure from Europe, the Bank of England, and Japan. 

This is effectively declaring war amounting to a sharp policy shift in contrast to the other central banks pleading with the Fed not to raise rates. Powell also said that he will shrink its monthly bond purchases at twice the pace it previously announced, ending QE altogether in March. You MUST understand that the US is the ONLY place for capital to flee and Powell is staring international capital flows straight in the eye.

By raising rates, Powell is NOT merely trying to fight inflation. He realizes that the inflows are intensifying and raising rates may steer some of that money into the bond market, which is the ONLY real market standing. By doing that, the money, he hopes, will be diverted from investing as in real estate and stocks which will help to cool those markets. So there is far more going on behind the curtain than meets the eye. This is declaring World War III in the financial markets.

Powell was asked at a news conference Wednesday what specifically had caused the Fed to pivot to a tighter credit policy. He said:

“It was essentially higher inflation and much faster progress in the labor market." 

The key here was that Powell acknowledged the possibility that inflation WILL NOT decline as expected next year. This is because the Fed is now realizing that Europe is doomed and the real risk here, besides the shortages, is that there will be a massive capital flight to the dollar.

“There’s a real risk now, that inflation may be more persistent and that may be putting inflation expectations under pressure, and that the risk of higher inflation becoming entrenched has increased. I think part of the reason behind our move today is to put ourselves in a position to be able to deal with that risk.”

Powell is acknowledging what our model has been forecasting - a dollar bull market, stagflation, and rising interest rates. The Fed is clearly shifting its attention away from reducing unemployment and they realize that the Democrats is constantly extending benefits when the number of vacant jobs has never been so high, is creating not just a false image of the economy, but it is forcing wages higher which has been propelling inflation.

 

There will be those who criticize the Fed using the old traditional analysis that raising borrowing costs too fast could stifle consumer and business spending threatening to weaken the economy raising unemployment. This is the traditional view looking at everything under the old domestic economy tools and ignoring international capital inflows.

It has been the housing cost increases, which has also impacted apartment rentals in addition to homeownership, which make up about one-third of the consumer price index. We have a flight from the urban centers to the suburbs and flights from the high-taxed states like California and New York. Overall, housing costs have been rising at a 5% annual pace recently. Restaurant prices have jumped nearly 6% as labor shortages hit that industry in particular. 

Be sure to read this companion piece.  The money for COVID is ending and so, too, will the COVID hysteria in 2022.  Inflation shall replace that horror.  

 

CANADA TRYING TO DENY FOOD TO UNVACCINATED

From Armstrong Economics, 

Politicians are not just violating the foundation of a free society, they are now moving to such tyranny unmatched throughout history. These governments will not relent. They have been deliberately trying to destroy the economy so Schwab can Build Back Better. They have gone this far with shutdowns and all sorts of restrictions of the people and economies, all under the pretense of a virus that was made in a lab and has not been really dangerous like the plague or even that influenza. These measures might be applicable for the Black Plague where 30% to 50% of the population might die.

To now deny food to the unvaccinated is tyranny that not even Hitler did to the Jews he held in camps. At least he fed them while he was sterilizing them which is the dream of Gates, or until they were just gassed.

There is NO WAY this will ever be resolved peacefully. All the protests around the world will never cause these ruthless politicians and those in government who support them to ever rethink of relent. Those who have questioned our computer’s forecast for civil war had better look out the window for this is nev er returning to normal.