Economics: Unabated tide of remittance inflows stokes consumption but super peso and inflation take their toll
One of the sources of income that explains the dynamism of consumption in Mexico at the end of 2022 and through the first half of 2023 is the level of remittances that have been flowing in from the United States, which as of June registered an 8.3% annual increase in US currency to total 5.57 billion dollars.
As of the first half of the year, remittances had accumulated a 9.9% growth as inflows totaled 30.24 billion dollars in the period, which is the highest ever for a six-month period and is also projected to be the highest for this year.
However, despite the significant growth in the number of dollars being sent south, the extent to which the peso has appreciated against the dollar and the extent of inflation in Mexico in the first half of the year, we have seen remittance income decline when expressed in real pesos over the past eight months with the annual decrease reaching 15.1% in June, pushing the monthly average decline for the first six months of the year to 7.4%.
No slowing of remittance flows is expected in the short term thanks to continuing growth in US economy in sectors in which the Mexican immigrant population is heavily employed, such as construction and services, but we may begin to see a weakening of those sectors some time next year.
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