New order growth softens to seven-month low

Key findings

• New business continues to rise, but at weaker pace
• Faster increase in employment
• Inflationary pressures remain muted

The latest PMI data signalled ongoing growth in Ghana’s private sector at end of the year’s third-quarter. Further increases in output and new orders were recorded, although there were some signs of demand softening. Employment and purchasing activity also increased, with the pace of job creation picking up from that seen in August. Meanwhile, inflationary pressures remained relatively muted.

The S&P Global Ghana Purchasing Managers’ Index (PMI) posted 50.5 in September – above the 50.0 no-change mark for the eighth consecutive month, but down from 51.9 in

August. The reading therefore signalled a slight and softer pace of improvement in the private sector’s health.

Although business activity increased for the eighth month running in September, the latest expansion was only marginal and the softest since June. While some firms raised output in response to higher new orders, others indicated that there were signs of demand softening.

Similarly, new order growth slowed at end of the third quarter and was the weakest in seven months. A number of firms however continued to report success in securing new business.

While rates of growth for output and new orders eased in September, the pace of job creation quickened and reached a five-month high. Respondents indicated that higher new orders and filling existing vacancies were behind the rise in employment.

Purchasing activity and inventory holdings also expanded as companies responded to greater demand for products and services.

Improved operating capacity meant that companies were able to deplete their backlogs of work again in September. Outstanding business decreased at a solid pace, albeit that it was the softest in four months.

Suppliers’ delivery times shortened markedly again, as some panellists reported that vendors had been able to speed-up deliveries. Prompt payments also helped firms to receive goods more quickly.

Inflationary pressures remained relatively muted at end of the third quarter. Purchase prices increased at a softer pace than in August, and were much weaker than the series average. While currency weakness was a factor leading to higher purchase costs, a relatively stable exchange rate reportedly acted to limit the pace of inflation. Meanwhile, the pace of staff cost inflation quickened but remained modest.

The pass-through of higher input costs to customers led to a further monthly rise in selling prices. The rate of inflation was solid and quickened to a four-month high, but was still weaker than average since the series began in January 2014.

Companies remained optimistic that output will increase over the coming year, with positive sentiment supported by hopes for an improvement in economic conditions.

Sentiments were broadly in line with those seen in August.

Andrew Harker, Economics Director at S&P Global Market Intelligence said:  “There were some signs of growth in Ghana losing momentum in September, but with new orders still rising there were still plenty of positives from the latest PMI survey. Chief among them was a more marked increase in employment over the month. Looking at the third quarter as a whole, we can expect a further positive GDP print when the official data are released.

“Inflationary pressures were again limited by a relatively stable exchange rate environment, a picture firms will be hoping to see continue in the year’s final quarter.”

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