Mexico: Weak peso boosts remittances in September
October 3, 2016
Remittances from workers abroad soared in September, following two timid expansions in July and August. Transactions totaled USD 2.4 billion in September, which marked a 15.7% increase over the same month last year (August: +0.7% year-on-year). The increase brought the 12-month trailing sum of remittances to USD 26.2 billion, which represented a healthy 6.2% year-on-year expansion. This followed the 5.3% increase in the 12 months up to August.
The ongoing improvement in the U.S. labor market continues to support the upward trend in remittances, but September’s increase, which is clearly well above the growth trend, suggests that Mexican workers abroad are taking advantage of the weakness of the peso. Remittances thus currently look to be being boosted artificially by the peso depreciation and workers’ opportunistic behavior. Analysts suggest that, since the acceleration in remittances is not being driven by real income effects, but rather by the aforementioned factors, growth in remittances is expected to slow in the coming months.
Author: Ricardo Aceves, Senior Economist