Private sector output growth eases to five-month low

The June 2018 edition of Stanbic Bank Ghana’s Purchasing Managers Index (PMI) has reported that output growth in the Ghanaian private sector has hit a first time low since January this year. According to the report, the rate of growth which was at a sharp pace in the previous months moderated for the first time in the month of June, signalling the weakest growth since January 2018.

“Although business conditions in the Ghanaian private sector continued to improve in June, the rate of growth moderated from the sharp pace seen in the previous month. Output, new orders and employment all rose at weaker rates than in May. Meanwhile, there were signs of inflationary pressures increasing, with both input costs and output prices rising more quickly over the month”, the report said.

Commenting on June’s survey findings, Phumelele Mbiyo, Head of Africa Research at Standard Bank said: “The PMI is still showing that the private sector is growing, having done so for 29 consecutive months. Businesses surveyed indicated that customer numbers and new orders were increasing, as were workloads, inventories and employment levels. Nonetheless, the drop in the PMI to 52.7 in June from 55.8 in May illustrated that the pace of growth decelerated. It is noticeable that there was some increase in inflation pressures”.

Mr. Mbiyo went on to say that “staff costs accelerated, one set of factors precipitating the increase in inflation pressures. Input costs also rose in the month, with respondents attributing such an increase to the depreciation of the cedi and higher fuel prices. The PMI is broadly consistent with macroeconomic data that shows the economy growing strongly. The hint of pricing pressures indicated by the survey results might be confirmed by a deceleration in the pace of decline in actual consumer price inflation.”

The Stanbic Bank June PMI also reports that rising customer volumes were also behind an increase in new orders, which expanded markedly. With workloads continuing to rise, companies increased their staffing levels. This enabled backlog clearance, with outstanding business declining for the first time in three months and to the greatest extent since last October.

Again, as was the case with output, new orders and employment, the rate of growth in purchasing activity moderated in June. The latest increase in input buying was the weakest since February 2016. Meanwhile, stocks of purchases rose solidly, reflecting improved demand and confidence regarding future new business receipts. There were also signs of inflationary pressures returning at the end of the second quarter. Both purchase prices and staff costs rose at sharper rates in June.

In response to higher input costs and other pressures, companies raised their output prices, the second successive month in which this has been the case accordingly. Although quickening from May, the rate of inflation remained modest.

The Stanbic Bank Ghana Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Ghanaian economy, including agriculture, construction, industry, services and wholesale and retail. The panel is stratified by GDP and company workforce size. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month.