Output rises for first time in 14 months


Key findings

  • Renewed expansions in output and new orders
  • Selling price inflation at 14-month low
  • Employment increases for third month running

February data signalled a renewed improvement in business conditions across Ghana’s private sector, thereby ending a one-year period of deterioration. Softer price pressures helped lead to a revival of demand, supporting expansions in both new orders and business activity. Companies also increased their staffing levels, for the third month running.

The S&P Global Ghana Purchasing Managers’ Index moved back above the 50.0 no-change mark during February, posting 50.2 from 47.2 in January. The index signalled a first-strengthening of the private’s health in just over a year, albeit that it was only marginal overall.

Both output and new orders returned to growth in February, rising for the first time in 14 and 12 months respectively. In both cases, the increases were slight as economic conditions remained challenging. Where improvements were signalled, panellists often attributed this to softer inflationary pressures.

Overall input costs increased at the slowest pace for a year, although it was still marked as both purchase prices and staff costs rose.

Higher purchase costs often reflected currency weakness, but the rate of inflation eased to a two-year low in February. Bucking the wider trend, staff costs increased at the fastest pace in three months as companies acted to help their workers through a period of rising living costs.

Companies often passed higher input costs on to their customers, but softer inflationary pressures meant that in some cases they were able to offer discounts in attempting to stimulate demand. As a result, the rate of output price inflation eased for the third consecutive month – to the slowest since December 2021.

Hopes that cost pressures will continue to soften and that economic conditions will improve supported confidence in the 12-month outlook for business activity. That said,
sentiment eased from the one-year high seen in January to the weakest in three months.

Higher new orders and the filling of previously vacant positions meant that employment increased again in February. The rate of job creation was slight, but quickened for the second month running to the fastest since June last year.

The rise in employment came amid some signs that capacity could soon come under pressure. Firms continued being able to address backlogs, but the latest reduction was smallest in the current 14-month sequence of falling outstanding business.

Rising demand and the prospect of further improvements in the coming months led companies to expand their stocks of purchases, ending a 14-month sequence of reduction. Moreover, the rise in inventories was solid and the fastest since September 2021.

With inventories up, companies generally judged that their holdings of inputs were sufficient for current workloads. This, allied with cost pressures, resulted in a further decrease in purchasing activity, albeit that it was only marginal and the softest in seven months.

Meanwhile, suppliers’ delivery times continued to shorten, extending the current sequence of improving vendor performance to 19 months. The latest shortening of lead times was the most pronounced since September last year, with companies attributing this to quicker deliveries, competition among suppliers and prompt payments.

Andrew Harker, Economics Director at S&P GlobalMarket Intelligence said: “Ghana’s private sector was in recovery mode in February, as the latest PMI data signalled renewed increases in output and new orders while inflationary pressures softened – selling prices rose at the slowest pace since the end of 2021.

“Economic conditions remain challenging, however, and firms will need to see inflation continue to come down if this recovery is to be sustained in the months ahead.”

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