Output growth hits 28-month high in August

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Economic growth slowed

Key findings:

  • Sharper increases in output and new orders
  • Weakest rise in selling prices since November 2020
  • Employment up for ninth month running

Ghana’s private sector continued to register improving business conditions in August. Moreover, growth gained momentum during the month – with sharper increases recorded in output, new orders and employment.

Firms were helped by cost pressures remaining relatively muted, despite intensifying slightly in August. Selling price inflation meanwhile eased further, and was the weakest since November 2020.

The S&P Global Ghana Purchasing Managers’ Index™ (PMI) was above the 50.0 no-change mark for the seventh month running during August, and rose to 51.9 from 50.5 in July to signal a sharper rate of improvement in the private sector’s health. In fact, business conditions strengthened to the greatest extent in just under two years.

August saw a solid monthly increase in Ghana’s private sector business activity, with the rate of expansion hitting a 28-month high. Output has now risen in each of the past seven months, with the latest increase linked to muted price pressures and stronger customer demand.

Although purchase prices increased at the fastest pace in three months during August, the rate of inflation was still much softer than seen in late-2022 and early-2023.

Meanwhile, the pace at which staff costs increased eased for the fifth consecutive month and was the weakest in two and a half years.

The recent easing of cost inflation provided space for some companies to lower their selling prices. Although output charges continued to rise overall, the latest increase was only marginal and the least pronounced since November 2020.

Softer selling price inflation helped firms to secure new business in August, leading to a seventh successive monthly rise in new orders. Moreover, the rate of growth was solid and the sharpest in three months.

Rising new orders encouraged companies to increase staffing levels in August, with the filling of vacancies adding to workforce numbers. Job creation was recorded for the ninth month running. Although modest, the rise in employment was the most marked since April.

Sustained hiring enabled companies to keep on top of workloads, despite a pick-up in new order growth. Backlogs of work continued to decrease at a solid pace.

Higher new orders and better affordability of inputs led to a further increase in purchasing activity. Moreover, the rate of expansion was marked and the fastest since end-2018. In turn, stocks of purchases accumulated to the greatest extent since May 2018.

Suppliers’ delivery times continued to shorten markedly in August, with the rate of improvement in vendor performance only marginally weaker than the series record posted in the previous survey period. Respondents often attributed faster deliveries by suppliers to prompt payments.

Predictions of a relatively stable price and exchange rate environment were central to ongoing optimism in the year-ahead outlook for business activity in August. Higher new orders are also set to support output growth. More than 72% of respondents predicted a rise in activity over the coming year. Optimism was stronger than the series average, but dropped to a four-month low.

Andrew Harker, Economics Director at S&P Global Market Intelligence said: “Growth in Ghana’s private sector gained strength midway through the third quarter, boding well for a solid improvement in Q3 GDP should momentum be maintained through to September.

“Although there were some signs of cost pressures picking up in August, inflation remained much softer than was seen earlier this year and toward the end of 2022; again providing space for some firms to offer discounts to customers. With charges rising by the least extent since November 2020, clients were increasingly keen to commit to new orders – giving firms the confidence to ramp up activity accordingly. Should the relative stability in prices and the exchange rate continues, we can expect further growth in the months ahead.”

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