Rising producer costs threaten pace of Ghana’s disinflation

Ghana’s July 2026 Producer Price Index (PPI), released by the Ghana Statistical Service (GSS) last week has indicated that producer inflation accelerated to 4.0% year-on-year from 3.5% in June, while producer prices jumped 2.0% month-on-month, reversing a 3.7% fall in June; even as headline consumer inflation fell from 5.3% to 4.6%, with monthly CPI inflation just 0.1%.

This has provided a useful warning that the recent easing of consumer inflation may not proceed in a straight line asproducer costs are beginning to rise again, although businesses have so far absorbed much of the increase rather than immediately passing it through to consumers.

Nevertheless, (proprietary, unpublished and therefore un-attributable) macro-economic modelling suggests that rising producer costs, as identified by the July PPI, will only slow the pace of Ghana’s renewed disinflation rather than reverse it altogether.

Importantly, economists at the weekend agreed to be in broad agreement that mining and quarrying, the biggest driver of increasing producer price inflation in July – carrying a 43.7% weight in the PPI, with its producer prices increases acceleratingfrom 2.6% to 3.5% and contributing approximately 1.5 percentage points to the national PPI – is not a key threat to Ghana’s renewed consumer price disinflation, which resumed in July after three consecutive months of increases.

Rather, they have identified the sectors most likely to transmit rising producer costs to consumers as utilities, transport, manufacturing and construction, rather than mining itself.

This is because mining’s direct effect on consumer inflation is comparatively small because gold and other mineral output is largely exported and does not constitute a major component of household consumption. Mining therefore explains much of the headline PPI increase without necessarily implying an equivalent CPI increase.

Economists now assert that utilities represent perhaps the clearest near-term transmission channel. Producer inflation in electricity and gas reached 13.3% in July, up from 12.5% in June.

Water supply, sewerage and waste management recorded about 10.1%, with water collection, treatment and supply reportedly reaching 14.1%. These are unusually high producer-cost increases compared with the 4.6% CPI headline.

More importantly, utilities enter directly into the cost structures of virtually every business: factories require electricity, retailers require refrigeration and lighting, restaurants require power and water, while households pay utility bills directly.

This makes utilities the sector with the greatest potential for broad-based second-round inflation. The CPI for July already shows housing, water, electricity, gas and other fuels running at 8.3%, accounting for 22.8% of the overall inflation contribution. Consequently, even a partial pass-through of the 13.3% electricity-and-gas producer inflation announced last week could keep this component substantially above headline inflation over the next few months.

Transport is the second major risk they are warning of. Producer inflation in transport and storage was 10.1% for July, while land transport recorded the extraordinary rate of 23.4%.

This matters disproportionately highly because transport costs are embedded in the prices of food, manufactured goods, construction materials and virtually every service requiring movement of people or goods. Consumer transport inflation, however, was already easing, falling to 7.5% in July from 9.1% in June.

“The divergence suggests that transport companies are not yet passing their entire producer-cost increase through to passengers and customers” one monetary economist asserted.

“If they eventually pass through even one-quarter of the 23.4% land-transport producer inflation, the resulting additional pressure would be material, particularly on the 13.6% contribution to headline inflation attributed to transport.”

Manufacturing is a more moderate but potentially wider risk.Manufacturing PPI rose from 3.5% to 3.7% for July, with 15 manufacturing industries recording inflation above the subsector average. Fabricated metal products were an extreme outlier at 25.9%, while leather and related products recorded 17.4%.

“These rates will not translate one-for-one into household inflation because some affected products are intermediate or capital goods” the monetary economist continued.“Nevertheless, higher manufacturing costs eventually feed into retail prices where manufacturers have limited margins.”

The manufacturing channel is particularly important because it can reinforce utility and transport pressures: manufacturers face higher electricity and logistics costs simultaneously. Thus, even a seemingly modest 3.7% aggregate manufacturing PPI can conceal much larger cost increases in individual supply chains.

Construction has been identified as a medium-term rather than immediate risk. Construction PPI remained high at 4.8% for July, only slightly below 4.9% in June, while building construction itself recorded 7.9% inflation.

This is relevant to rents, property maintenance and new housing costs, but the transmission lag is longer because construction contracts and rents are generally adjusted less frequently.

However, the assessment of a quantitative economic model sighted by Economy Times – but not yet due for public release –is that July’s PPI increase is unlikely by itself to reverse disinflation, but it could reduce the speed of further disinflation by roughly 0.2–0.6 percentage points over the next two to three months, assuming only partial pass-through.

The caveat though is that the model assumes other factors that can influence price levels remain unchanged – such as the price of oil on global markets and the cedi’s exchange rate against the United States dollar – an assumption that is by no means certain.

A reasonable base case, according to the model, would see headline CPI remain around 4.5–5.0%, rather than continuing rapidly downwards towards 3–4%, with utilities and transport providing the strongest upward pressure. A higher-pass-through scenario could push inflation towards 5.0–5.5% if electricity, transport and manufacturing costs continue rising simultaneously.

The key mitigating factor is that July’s CPI momentum remains exceptionally subdued: consumer prices rose only 0.1% month-on-month, while food inflation fell to 3.1%. Thus, the immediate inflationary threat is not a broad producer-cost explosion.

It is simply the possibility that persistent double-digit producer inflation in utilities and transport could gradually work through the domestic supply chain and prevent Ghana’s otherwise encouraging consumer-price disinflation from continuing at its recent pace.