Macro Watch: Mexico remittances, Peru inflation

Friday, September 1, 2017

Mexican remittances boom

Mexico's central bank reported July remittances climbed 9.4% year-on-year to US$2.46bn, coming in well above analyst expectations.

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The result was the highest for any July going back to 1995. Remittances continue to break records in 2017, having risen 6.4% in the first seven months of the year to US$16.4bn.

In a statement, Banorte-IXE noted the result beat both its own estimate (US$2.39bn) and the consensus forecast (US$2.38bn). The bank added that July transfers outstripped even the highest estimate included in its consensus projection (US$2.42bn).

Banorte said the positive result is partially explained "by the vitality sustained in the US labor market, which is reflected in greater hiring of Mexican migrants." The bank added that the US has added about 937,000 jobs for Mexican migrants, heavily favoring migrants with US citizenship.

The bank also noted there has been a drastic decline in the growth of undocumented Mexican migrants since January, and US employers have been showing an increased preference for documented workers.

"This suggests that the observed increase in the flow of remittances is also due to the immigration policy of the Donald Trump administration, since Mexican migrant workers are likely to continue discounting a higher probability of being deported," read the Banorte report. "We believe these two factors will be pivotal in explaining the flow of remittances in the coming months."

Peru CPI rises in August

Annual inflation hit 3.37% in August, according to statistics agency INEI, driven by higher food prices, while prices increased 0.62% over July.

The annual rate pulled higher in August after sitting just above the central bank's target range of 1-3% in July (3.04%) and June (3.02%); something which contributed to the bank's decision to hold the benchmark interest rate steady at 3.75% at its August meeting.

Food and non-alcoholic beverages provided the largest input into the annual result, rising 1.33% in August for a weighted contribution of 0.36 percentage points. Food prices, and fruit prices in particular, were key to the segment's surge in prices, where lime prices increased 140% alone, according to INEI.

Housing, water, electricity and cooking fuels increased 2.00% as a segment, the highest increase of any segment reported, generating a weighted contribution of 0.17 percentage points to the annual figure.