Inflationary pressures soften again, leading to improving demand

Ghana Purchasing Managers’ Index
  • Selling prices rise at slowest pace in 25 months
  • New order growth fastest since September 2021
  • Record improvement in supplier performance

A further softening of inflationary pressures helped to support demand across Ghana’s private sector during May. As a result, stronger expansions in output, new orders and
purchasing activity were signalled and the business outlook brightened. Meanwhile, better raw material availability contributed to a series-record improvement in suppliers’
delivery times.

The S&P Global Ghana Purchasing Managers’ Index™(PMI) was unchanged at 51.3 in May, thereby signaling an improvement in business conditions for the fourth successive month.

A key theme across the PMI survey in May was the positive impact of softening price pressures on customer demand and wider activity in the private sector.

Although companies continued to increase their selling prices midway through the second quarter, the rate of inflation eased for the sixth month running from last
November’s series record and was the softest in just over two years.

The weaker rise in selling prices was in line with the picture seen for input costs, with purchase prices and staff costs increasing at the softest rates in 30 and four months

Those firms that continued to see purchase costs rise linked this to higher raw material prices and exchange rate fluctuations. Meanwhile, increases in employee expenses
were often a reflection of firms raising their staff salaries in response to higher living costs.

With inflationary pressures weakening, firms were better able to secure new business in May. New orders increased for the fourth consecutive month, and at a marked pace that
was the fastest since September 2021.

In turn, companies also upped their business activity at the fastest pace in 20 months, extending the current sequence

With new orders rising, companies continued to expand both their purchasing activity and employment and were thus able to prevent a build-up of backlogs of work.

Staffing levels increased for the sixth month running, but the rate of job creation was only marginal and the joint-slowest in 2023 so far. The picture regarding purchasing activity was more positive, however, with growth hitting a 31-month high.

Despite rising demand for inputs, better material availability and competition among suppliers meant that firms saw a marked shortening in lead times on the delivery of inputs in May. In fact, supplier performance improved to the greatest extent in the survey’s history.

The expansion in purchasing activity was therefore translated into a further increase in stocks of inputs, with firms keen to build inventories in line with higher new orders
and positive expectations for the months ahead.

Indeed, sentiment around the 12-month outlook for business activity improved to the highest since January. Firms were hopeful that prices and exchange rates would be relatively stable over the year ahead, while there was some optimism
that the deal with the IMF would help to support activity.Close to 74% of respondents were optimistic that output will be higher than current levels in 12 months’ time

Andrew Harker, Economics Director at S&P Global Market Intelligence, said:
“Latest PMI data signalled that the recovery in Ghana’s private sector continued midway through the second quarter. The price indices from the survey are consistent with a sustained slowdown in inflation which is providing the catalyst for the recovery, helping firms to secure volumes of new business.

While there is still some way to go before business conditions become more
comfortable, the picture in May was one of an economy moving tentatively in the right direction.”


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