Activity decreases in January, but new order growth remains solid


Key findings

  • New orders increase, supporting job creation and higher purchasing
  • Output down for first time in five months
  • Inflationary pressures remain elevated

Overall business conditions continued to improve in Ghana’s private sector during January, despite a reduction in output. New order growth remained solid and firms continued to expand staffing levels and purchasing activity. Meanwhile, inflationary pressures remained elevated.

The headline seasonally-adjusted Ghana PMI posted 50.8 in January, down from 51.8 in December but still signalling an improvement in business conditions at the start of the year. Operating conditions in the private sector have now strengthened in each of the past five months, although the latest upturn was the softest in this sequence.

The rate of growth in new orders remained solid, slowing only slightly from that seen in December as customer demand continued to improve.

In response to higher new orders, firms increased their staffing levels. In some cases, previously vacant positions have been filled, helping support a fifth successive rise in employment and one that was solid overall. Purchasing activity was also up, albeit slightly. Rising capacity helped firms to keep on top of workloads and reduce backlogs.

In contrast to the rise in new orders, business activity decreased in January; thereby ending a four-month sequence of growth. Anecdotal evidence suggests that price rises had a negative impact on activity, with emergence of the Omicron variant of the COVID-19 virus – also a factor behind the modest reduction in output. Sector data indicated that weakness was centred on the agriculture and wholesale & retail categories.

Despite the drop in January, firms were strongly optimistic that output will increase over the coming 12 months. In fact, sentiment improved to the second-highest in 15 months.

Commenting on the latest survey results, Andrew Harker-Economics Director at IHS Markit said: “While output decreased in January, other aspects of the latest Ghana PMI maintained the positive picture from recent months. New order growth remained solid and firms continued to raise employment and purchasing. Companies will therefore be hoping that the dip in activity is just a temporary blip, and that output will return to growth in line with higher new orders in the months ahead. Business confidence data support this, with sentiment regarding future output improving to the second-highest in 15 months”.

Around 85% of respondents are confident in the outlook amid positive expectations regarding new orders.

Overall input costs increased at a slightly faster pace in January, with purchase prices in particular rising sharply. The rate of purchase cost inflation was sharper than the series average, with higher prices for raw materials, freight and fuel all mentioned. Import duties and currency weakness added to cost burdens. Meanwhile, efforts to help employees deal with higher costs, and transport fares in particular, led to a further increase in staff costs.

Output prices also continued to rise sharply as firms passed higher input costs onto customers. Charges have now increased in 21 consecutive months. The aforementioned price pressures meant that firms were reluctant to hold excess inventories, leading stocks of purchases to decrease for the second month in a row. Suppliers’ delivery times continued to improve amid competition among suppliers and clear requirements provided to vendors in terms of delivery needs. That said, lead times shortened to the least extent since August last year.

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