Ghana's private sector returns to contraction - Report

The Ghanaian private sector ended the third quarter of the year in contraction territory amid renewed declines in output and new orders, according to S&P Global Purchasing Manager Index.

Inflationary pressures acted to limit demand, the PMI report for September stated.

More positively, companies continued to increase their staffing levels. The S&P Global Ghana Purchasing Managers’ Index™ (PMI®) dipped below the 50.0 no-change mark for the first time in three months during September, thereby signaling a renewed deterioration in business conditions in the private sector.

At 49.1, the index was down from 51.1 in August and pointed to a slight worsening of operating conditions. Central to the deterioration of business conditions were renewed falls in both new orders and business activity in September.

New business decreased for the first time in eight months, and at the fastest pace since January 2023. S&P said falling new orders were often linked to inflationary pressures, with the recent spell of strong price rises having limited the ability of customers to commit to new projects.

The drop in demand led companies to scale back business activity, which returned to contraction after expanding in August. The pace of decline was only slight, however. Despite the reductions in output and new orders, the replacement of previously departed workers meant that companies continued to expand their staffing levels in September.

Employment was up for the eighth month running, with the pace of job creation broadly in line with that seen in August. With new orders falling, additional staff were often used to help work through outstanding business, which decreased at a solid pace.

Companies lowered their purchasing activity for the second month in a row during September, albeit marginally. The fall in input buying reflected weak customer demand and high prices for inputs.

Stocks of purchases were also down, falling for the first time in three months. Purchase costs increased rapidly again in September, with the rate of inflation remaining above the series average despite easing to a five-month low.

Higher purchase prices were often linked by panelists to a depreciation of the cedi against the US dollar. Staff costs were also up as firms helped their workers with higher living expenses.

Here too, however, the pace of inflation softened and was the lowest since January. Higher costs were often passed through to customers, resulting in a further sharp increase in selling prices.

That said, the pace of inflation eased for the third consecutive month. Suppliers’ delivery times shortened again, and at the same pace as seen in August.

Business confidence strengthened for the second month running in September amid hopes that greater stability of exchange rates and prices will help to improve business conditions.

Around 77% of respondents predicted a rise in output over the coming year, with sentiment stronger than the series average.

Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The latest PMI data for Ghana suggest that the economy may struggle to maintain the strong annual GDP growth recorded during the second quarter of the year, with demand weighed down by inflationary pressures during the third quarter.

“Firms remained confident in the year-ahead outlook, however, and continued to hire additional staff, hinting that the falls in output and new orders seen in September may be part of a temporary soft-patch rather than a more sustained slowdown.”