Mexico's economy, hobbled in recent months by a U.S. slowdown and less demand for exports, expanded 2.5 percent in June from the same month last year, modestly less than analysts had forecast in a Reuters poll.

Economic activity was up 0.33 percent in June from May, according to the monthly IGAE index, which measures the vast majority of Mexico's economic output.

Analysts in a Reuters poll on average had expected economic activity to grow 2.55 percent in June.

The key industrial sector expanded a scant 0.1 percent in June compared to the same month in 2006, while services grew 3.5 percent and agriculture increased 4.5 percent, the government said on Tuesday.

The Mexican economy grew 4.8 percent in 2006 but is losing steam this year as the United States, the country's main trade partner, suffers from a sluggish economy.

Second-quarter growth in Mexico was 2.8 percent.

A crisis in the U.S. subprime mortgage market that is causing global market volatility and threatening to spread to banks in other countries could further slow the U.S. economy, analysts say.

Mexico