Sharpest rise in output for eight months - S&P Global Index

Ghana’s private sector saw growth momentum pick up at the start of the second quarter of 2024, with improving demand feeding through to faster increases in both new orders and business activity. Employment also continued to rise, albeit marginally.

Meanwhile, there were further signs of inflationary pressures building as currency weakness resulted in the sharpest increases in both purchase costs and selling prices since the end of 2022.

The S&P Global Ghana Purchasing Managers’ Index (PMI) rose to 51.3 percent in April from 50.9 percent in March, posting above the 50 percent no-change mark for the third consecutive month. Although modest, the improvement in business conditions signalled by the latest reading was the most pronounced in 2024 so far.

Stronger customer demand helped companies to secure greater new order volumes during April, with some respondents also mentioning having secured new business via client recommendations. New orders expanded for the third month running, and at a solid pace.

In turn, business activity also grew solidly, rising for the second consecutive month and at the steepest rate since August last year.

Higher new orders also encouraged firms to take on extra staff, sometimes through the filling of previously vacant positions. The rate of job creation was only marginal, however, and the softest in the current three-month sequence of rising employment.

Although modest, the latest increase in staffing levels meant that firms were again comfortably able to keep on top of workloads in April and reduced outstanding business solidly. In fact, the latest depletion of backlogs was the most pronounced in almost four years.

The rate of overall input cost inflation accelerated for the third month in a row during April amid sharper increases in both purchase prices and staff costs. In fact, the latest round of purchase price inflation was the most pronounced since December 2022. Respondents mainly linked increased purchase costs to a depreciation of the cedi against the US dollar, while higher fuel prices were also reported.

In turn, companies also increased their own selling prices at the fastest pace in 16 months, with the pace of inflation quicker than the series average.

Increases in new orders meant that purchasing activity rose for the third month running, albeit at only a marginal pace that was the softest in the current sequence of expansion. The same trends were seen with regards to inventories. Some panellists indicated that recent purchases had left their holdings of inputs in a healthy position, thereby reducing the need to expand further.

Competition among suppliers resulted in a further shortening of vendor lead times in April, with supplier performance improving solidly over the course of the month.

Looking to the future, firms were strongly optimistic that output will increase over the coming 12 months, with close to 77 percent of respondents expressing a positive outlook. In fact, sentiment rose to the highest in the year-to-date and was stronger than the series average. Improved product offerings are set to help firms to secure new orders. Output would also be boosted by more stability around the currency and prices, according to firms.

Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The initial impression of the latest S&P Global Ghana PMI is one of positivity, with both output and new orders rising more quickly than in March. Companies have continued to find success in securing new business despite building inflationary pressures.

“The extent to which these price pressures are intensifying is a cause for concern, however. With both purchase costs and selling prices rising at the fastest rates since the end of 2022, the sustainability of the current period of growth must be in doubt, unless a hoped-for stabilisation of the cedi and prices comes in the months ahead.”