Remittances to Mexico hit new record

Remittances to Mexico for the month of September were up 8.8% year-on-year to US$2.71bn, according to the central bank, the highest level for that month for any year on record.

Cumulative remittances from January to September stood at US$24.7bn, a 10.8% increase over the same period of 2017, putting 2018 well on track to become the strongest ever for the cross-border transfers.

September transfers, nevertheless, were off 5.1% from August levels, representing the fourth consecutive monthly decline. Remittances to Mexico in May were the highest for any month on record at US$3.16bn.

The number of money transfer operations fell to 8.6mn in September from 8.8mn in August, while the average transfer declined to US$324 from US$317 in the same comparison.

Banorte, in a research note, suggested the drop in both figures might have been related to "relative strength and stability in the exchange rate" that month, explaining that when the peso strengthens, "Mexican migrants often send a lower amount of remittances, considering that one has a lower acquisitive power."

"On the other hand, the US labor market continues to show strength, benefiting the Mexican workers in that country," added Banorte. "We believe remittances will continue to show favorable growth rates considering that fundamentals remain strong and the peso has recently weakened."

"Considering that the economy is close to full employment, it is likely that wages for Mexican employees will continue to rise," noted the bank. "However, it is worth mentioning the possibility of a slowdown in the pace of job creation given the maturity of the economic cycle."