Key findings
- Job creation at five-month high amid solid rise in new orders
- Activity continues to increase, but at reduced rate
- Purchase price inflation ticks higher
The start of the year’s fourth quarter saw private sector remain in growth territory, with output and new orders each increasing for the second month running in October. Companies expanded their purchasing and employment levels accordingly, with increased capacity enabling firms to deplete backlogs of work.
On the price front, higher costs for fuel and freight alongside currency weakness led to a sharper increase in purchase prices, with firms raising their output charges accordingly.
The headline seasonally-adjusted Ghana PMI remained above the 50.0 no-change mark in October, registering 51.0 from 52.6 in September. The reading pointed to a second successive improvement in business conditions; albeit one that was less marked than that seen in September.
New orders increased for the second month running, and at a solid pace. General improvements in demand and the launch of new products were reportedly behind the latest rise.
While new order growth remained solid, the pace of expansion in business activity slowed and was marginal. Some firms suggested that difficulties in securing materials had restricted the overall increase in output.
Efforts to expand capacity and keep output growing in line with rising new orders resulted in further increases of both purchasing activity and staffing levels during October.
Employment rose for the second month running, and at the fastest pace since May. Meanwhile, the rate of expansion in purchasing activity was the sharpest since April.
Higher capacity enabled firms to keep on top of workloads, as shown by a third successive reduction in outstanding business. Moreover, the rate of depletion was the sharpest in almost a year-and-a-half.
Companies were able to receive their purchased items more quickly in October, as suppliers responded well to requests for faster deliveries and companies paid for inputs promptly. In fact, the shortening of lead times was the most marked for seven and-a-half years.
While some firms were able to expand their inventories, others indicated that material price rises deterred them from holding stocks of inputs. Overall, inventories decreased fractionally.
Higher input costs were again highlighted by the latest survey. Purchase prices rose sharply – with higher fuel costs, increased freight charges and currency weakness the main factors behind the rise. Staff costs were also up, albeit modestly. The passing-on of higher input costs to customers resulted in a sharp increase of selling prices – the eighteenth in as many months.
Finally, expectations of further improvements in new orders and hopes of a lack of disruption from the COVID-19 pandemic meant that companies remained optimistic in the 12-month outlook for business activity. Approximately three-quarters of respondents predicted a rise in output, with sentiment improving to a three-month high.
Commenting on the latest survey results, Andrew Harker, Economics Director at IHS Markit said: “After returning to growth in September, Ghana’s private sector maintained expansion into October and should be set for a positive end to the year. While output was constrained to some extent by difficulties in sourcing materials, firms were able to compensate by expanding capacity through hiring workers and purchasing more inputs. Inflationary pressures remain a key headwind, however, with fuel and freight costs in particular causes for concern”.
