Inflationary pressures soften again, leading to improving demand

A further softening of inflationary pressures helped to support demand across Ghana’s private sector during May.

As a result, stronger expansions in output, new orders and purchasing activity were signalled and the business outlook brightened. Meanwhile, better raw material availability contributed to a series-record improvement in suppliers’delivery times.

The S&P Global Ghana Purchasing Managers’ Index™(PMI®) was unchanged at 51.3 in May, thereby signalling an improvement in business conditions for the fourth successive month.

A key theme across the PMI survey in May was the positive impact of softening price pressures on customer demand and wider activity in the private sector.

Although companies continued to increase their selling prices midway through the second quarter, the rate of inflation eased for the sixth month running from last November’s series record and was the softest in just over two years.

The weaker rise in selling prices was in line with the pictureseen for input costs, with purchase prices and staff costs increasing at the softest rates in 30 and four months respectively.

Those firms that continued to see purchase costs rise linked this to higher raw material prices and exchange rate fluctuations. Meanwhile, increases in employee expenses were often a reflection of firms raising their staff salaries in response to higher living costs.

With inflationary pressures weakening, firms were better able to secure new business in May. New orders increased for the fourth consecutive month, and at a marked pace that was the fastest since September 2021.

In turn, companies also upped their business activity at the fastest pace in 20 months, extending the current sequence of growth which began in February in the process.

With new orders rising, companies continued to expand both their purchasing activity and employment and were thus able to prevent a build-up of backlogs of work.

Staffing levels increased for the sixth month running, but the rate of job creation was only marginal and the joint-slowestin 2023 so far. The picture regarding purchasing activity was more positive, however, with growth hitting a 31-month high.

Despite rising demand for inputs, better material availability and competition among suppliers meant that firms saw a marked shortening in lead times on the delivery of inputs in May. In fact, supplier performance improved to the greatest extent in the survey’s history.

The expansion in purchasing activity was therefore translated into a further increase in stocks of inputs, withfirms keen to build inventories in line with higher new orders and positive expectations for the months ahead.

Indeed, sentiment around the 12-month outlook for business activity improved to the highest since January. Firms were hopeful that prices and exchange rates would be relatively stable over the year ahead, while there was some optimism that the deal with the IMF would help to support activity.

Close to 74% of respondents were optimistic that output will be higher than current levels in 12 months’ time.

Credit: S&P Global Ghana PMI


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