Mexico: Remittances remain strong in August

Remittances totaled USD 2.5 billion in August, an 8.8% expansion from the same month last year. The result followed a 9.4% year-on-year increase in July. The 12-month trailing sum of remittances reached a total of USD 28.2 in August, the highest reading on record. This represented an 8.8% increase compared to the same period last year, which was slightly above an 8.1% expansion in the 12 months up to July. Remittances benefited in August from a healthy U.S. jobs market and concerns regarding the U.S. trade and migration policy agenda.

Remittance inflows are behind some of the resilience seen in household consumption so far this year, which supported growth throughout H1 despite mounting inflationary pressures and decelerating credit growth. Although fears that President Trump might crack down on immigration in the U.S. have caused some to front-load their remittances, a shift in the drivers of growth—from growth in the number of transactions to average remitted amount—suggests that, as job creation slows down in the U.S. amid labor shortages, wage compensation is firming up. As such, panelists expect the trend to continue in upcoming months, which bodes well for private consumption in H2.

Notwithstanding the risk of tougher measures against Mexican immigrants in the U.S., analysts continue to expect remittances to increase further this year and to reach USD 28.4 billion by year-end. For 2018, the panel sees remittances rising to USD 29.9 billion.