The rate of business growth and expansion recovered slightly from the 22-month low seen in July this year indicating a consistent business growth in each of the past 31 months. This was contained in the August edition of the Stanbic Bank Ghana Purchasing Managers’ Index (PMI). According to the report, the recovery from the dip experienced in July could largely be attributed to sharper increases in output and new orders.
“Business activity increased modestly in August, with the rate of expansion recovering slightly from the 22-month low seen in July. Higher new orders and backlog clearance reportedly helped lead output to rise. New order growth also ticked up, with client relationships, good quality products and advertising activity all reportedly behind the latest increase in new business”, the report said.
Contrary to the improvement, however, the rate of employment, input buying and stock purchases, within the private sector in the month under review, all rose at a weaker pace. The report said “in contrast to faster increases in both output and new orders, employment rose at a weaker pace in August. The rate of job creation was slight and the slowest for a year-and-a-half. Both input buying and stocks of purchases also grew at softer rates over the month. Weakness of the Ghanaian cedi against the US dollar pushed up purchase costs and companies raised their output prices accordingly, albeit at a relatively modest pace.”
Commenting on August’s survey findings, Phumelele Mbiyo, Head of Africa Research at Standard Bank said:
“Although unchanged at 51.8 in August, the PMI indicates that the performance of the Ghanaian private sector is continuing to show robustness. However, compared to 2017 and earlier this year, the momentum seems to have decelerated somewhat. The PMI averaged 54.7 in 2017 and 54.3 in the first six months of this year. The pace of growth in output, new orders, stocks of purchases and employment have all decelerated meaningfully in that time.”
Phumelele further said: “The acceleration in input costs suggests that the depreciation of the cedi, especially since May, will probably compound the pressure on prices. That said, consumer price inflation is still below 10% year-on-year, and will likely remain subdued over the remainder of the year. These indications that the pace of growth is decelerating will be worth watching in the coming months. After all, the central bank has become a bit more hawkish, not lowering the policy rate despite inflation being within the target range.”
The PMI also reports an increase in purchase cost and output prices due to the depreciation of the Ghana Cedi against the dollar. According to the report, “sharper increases in output and new orders were recorded, although the rate of job creation eased. Weakness of the Ghanaian cedi against the US dollar pushed up purchase costs and companies raised their output prices accordingly, albeit at a relatively modest pace.”
The Stanbic Bank Ghana Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Ghanaian economy, including agriculture, construction, industry, services and wholesale and retail. The panel is stratified by GDP and company workforce size. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month.
