New orders return to growth, but output falls again

• New business rises slightly in February
• Output down for second month running
• Input costs and output prices decrease again

New orders returned to growth in Ghana’s private sector during February following a soft start to the year. The rate of expansion was only modest, however, and output therefore continued to be scaled back, as did purchasing activity.

Meanwhile, employment increased marginally. An appreciation of the cedi meant that purchase prices fell again, while staff costs decreased for the first time in just over five-and-a-half years. As a result, output prices were lowered for the tenth month running.

The S&P Global Ghana Purchasing Managers’ Index posted 49.2 in February, remaining below the 50.0 no change mark but rising from 48.5 in January to signal a softer deterioration in business conditions midway through the opening quarter of the year.

A key factor behind the worsening in the health of the private sector was a second successive monthly reduction in business activity in February. Output was down only modestly, however, and to a lesser extent than in January.

More positive news midway through the opening quarter came from a renewed expansion of new orders, which returned to growth following a first reduction in 12 months during January.

Where new orders increased, panellists reported promotional events, marketing activities and price reductions. That said, the rate of expansion was only slight. The aforementioned price reductions were a key feature of the Ghana PMI results again in February.

Overall input prices decreased for the fourth successive month, and at the fastest pace since last August. Both purchase prices and staff costs were down in February, with the latter falling for the first time since July 2020.

The sharper reduction was for purchase prices, however, which decreased solidly again in February. Respondents mainly linked lower purchase costs to an appreciation of the cedi.

These cost savings were often passed on to customers through lower output prices. February saw charges reduced for the tenth consecutive month, and to the largest extent in six months.

As has now been the case in each month for just over a year, Andrew Harker, Economics Director at S&P Global Market Intelligence: “There was something of a mixed picture from the latest S&P Global Ghana PMI data. Positively, we saw a renewed expansion of new orders as sustained falls in prices helped firms to record a rebound from the blip at the start of the year.

“Output continued to fall, however, suggesting that companies were not convinced enough in the strength of demand to start increasing activity. Should we see further improvements in new orders in the months ahead, however, we would expect output to follow suit.”

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