Business conditions decline moderately in June  

June PMI data

Key findings

  • Output falls for the sixth month in a row… although the rate of decline eased notably
  • Steep inflationary pressures persist

June PMI data for Ghana pointed to a fifth successive monthly deterioration in business conditions amid sustained contractions in output and new orders. The rates of decline eased, however; and were only moderate overall. At the same time, headcounts continued to expand, and backlogs fell for the sixth month running.

On the price front, input costs continued to increase markedly amid higher fuel, raw material and staff costs. Selling prices also rose sharply, but the rate of inflation eased from May’s record high.

The S&P Global Ghana Purchasing Managers’ Index™ (PMI®) posted below the neutral value of 50.0 for the fifth month in succession, indicating a deterioration in business conditions. At 48.5 in June, up from 47.4 in May, the latest fall eased from that seen in the previous survey period and was the weakest for four months.

Output fell at the joint-softest pace for five months during June. However, the rate of decline was still solid amid reports of weak demand.

A similar trend was seen with regards to new orders which fell for the fourth month in a row. Firms once again reported that cash shortages and high prices weighed heavily on demand in June. That said, the rate of contraction was only modest, and the weakest in the current sequence of decline.

Despite sustained falls in output and new orders, firms raised their headcounts for the tenth month running at the end of the second quarter. The rate of employment growth was modest and quicker than the long-run series average. Firms reportedly raised headcounts to fill vacant positions.

Continued falls in new work, paired with sustained employment growth, resulted in spare capacity at Ghanaian companies. Backlogs have now fallen in each of the last six months though the latest decline was the softest in this sequence.

Vendor performance improved for the eleventh month running in June. Moreover, the extent to which lead-times shortened was the third-quickest in the survey’s history, surpassed only by those in November 2021 and the previous survey period. Firms reported that fewer orders at suppliers helped speed-up deliveries in June.

Quantity of purchases fell in June, albeit only slightly. The latest result indicated back-to-back contractions in buying activity, with panellists indicating weak underlying demand resulted in the fall. High prices also reportedly discouraged firms from placing orders. In response, firms cut back on inventories which fell marginally in June, but for the seventh month in a row.

Turning to prices, purchase costs continued to rise sharply, with the rate of inflation posting well above the long-run series average in June. Higher fuel prices, currency weakness and increases in costs for raw materials all added to purchase prices according to respondents. Staff costs also rose amid upward revisions to pay – in line with higher living costs.

With input costs rising sharply, companies increased their own selling prices in June. Charge inflation was recorded for the twenty-sixth month in succession, with the latest rise among the quickest in the series history.

Firms expect demand improvements to continue over the next 12 months, supporting confidence in the outlook for business activity. Moreover, sentiment improved from May.

Shreeya Patel, Economist at S&P Global Market Intelligence, said: “Ghana’s private sector continued to face the implications of steep price pressures in June. That said, there were positive signs that business conditions were moving in the right direction with output, new orders and purchasing activity all falling at softer rates at the end of the second quarter. Moreover, headcounts continued to expand, and firms were optimistic that their output would grow over the next 12 months following hopes of greater demand.

“That said, concerns around prices cannot be ignored. Latest data indicated steep pressures with firms commenting on higher fuel and material costs. Subsequently, staff wages were raised in line with higher living costs. Firms will not be able to recover if elevated costs persist. Fortunately, there were tentative signs that rates of inflation were starting to ease in June.”

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