OFW remittance volumes for the month of October grew by 3.1%, the fastest mark
since April\u2019s 3.8%. We attribute the uptick in inflows to the seasonal surge brought about by OFWs sending in more money in light of the holiday shopping season.<\/p>\n\n\n\n
While stronger volumes dollar-wise are a good sign, we note that upon converting to Peso, the value of remittances actually shrunk slightly compared to last year coming in at a slight decline of -0.5%. While this obviously throws some cold water onto the positive sentiment brought about by the uptick in dollar volumes, we nevertheless want to point out that upon factoring in the impact of inflation, the purchasing power of October peso remittances shows a strengthening of 2.5% which is marginally higher than September\u2019s 2.3%.<\/p>\n\n\n\n
In the coming months, while the peso values of remittances may continue to lag on account of the high exchange rate base from last year, the cooling inflation trajectory may ultimately lead to an improvement in the real purchasing power of remittances YoY. <\/p>\n\n\n\n
Heading into 2024, we believe that remittance growth (dollar terms) will likely improve to above 3%-levels, although not yet to the same level of strength that was seen prior to the pandemic. Likewise, remittances in real terms will also continue to strongly benefit as the inflation outlook continues to recede.<\/p>\n\n\n\n
Growth in inflation-adjusted remittances should bode well for the consumer sector as these provide fuel for many of households\u2019 expenditures, ultimately accounting for 8.9% of the country\u2019s GDP last year. <\/p>\n\n\n\n
As inflation continues to ease while dollar volumes of remittances gradually track higher, we would therefore look at undervalued names in the consumer sector, particularly among retailers
and food manufacturers. <\/p>\n\n\n\n
Additionally, the boost to consumption provided by remittances should also translate to direct benefits for property companies with large mall exposures (ie. SMPH and RLC).<\/p>\n\n\n\n