Mexico: Remittance inflows moderate in June
August 1, 2016
The increase in remittances moderated toward the end of Q2. Remittances totaled USD 2.3 billion in June, which marked a 6.9% increase over the same month last year. The print was in line with market expectations and marked a third consecutive month of increase, albeit at a slower rate than the 13.0% increase registered in May. With June’s increase, the 12-month trailing sum of remittances totaled USD 25.8 billion, which represented a solid 7.3% expansion compared to the same period last year. This followed the 7.2% expansion in the 12 months up to May.
The solid growth rate in remittance inflows in Q2 is mainly the result of the Mexican peso’s persistent weakness. According to analysts at JPMorgan, “workers tend to take advantage of a depreciated currency to boost the peso value of their dollar remittances.” In addition to a weak peso, remittances continue to be supported by a healthy U.S. labor market. U.S. payrolls in the construction sector—a proxy of hiring dynamics in the labor market with a high proportion of Mexican workers—continued to increase in June, although the increase was the slowest since September 2015.
Author: Ricardo Aceves, Senior Economist