Ghana’s Purchasing Managers’ Index declines as inflationary pressures mount
Ghana’s Purchasing Managers’ Index (PMI) fell to 49.7 in June 2024 from 51.6 in May, signaling a slight deterioration in business conditions after four months of improvement, according to data from S&P Global.
The decline in the index reflects mounting inflationary pressures, which have become a significant concern for the private sector. Strong inflation in June played a pivotal role in the renewed downturn at the end of the second quarter, the report indicated.
The rate of purchase price inflation surged to a 19-month high, accelerating for the fifth consecutive month. Respondents attributed the rise in purchase costs primarily to the depreciation of the cedi against the US dollar. Concurrently, staff expenses continued to rise as firms endeavored to support workers amid escalating living costs.
In a bid to counter soaring input prices, companies implemented substantial hikes in their selling prices. The pace of output price inflation reached its highest level since November 2022, with 34% of respondents increasing their charges. These inflationary pressures have dampened demand, resulting in stagnant new orders after four consecutive months of expansion. Nonetheless, some firms reported that customers had accepted price increases and continued to place new orders.
The impact of rising prices on client demand translated into a decrease in business activity for the first time in four months, albeit a slight one. Inflationary pressures also influenced private sector firms’ purchasing decisions.
Andrew Harker, Economics Director at S&P Global Market Intelligence, remarked, “The surge of inflation in Ghana’s private sector is exerting an increasingly concerning impact on business conditions. In June, this caused a stagnation of new orders and outright reductions in output and purchasing activity. While employment continued to rise, providing a rare bright spot, job creation is likely to become unsustainable if price increases continue to suppress demand.”
Despite these challenges, business confidence strengthened in June 2024, buoyed by hopes for improved economic conditions in the coming year. Optimism regarding the outlook for output is predicated on the stability of both the exchange rate and prices.
Looking at the second quarter as a whole, robust output growth in the first two months suggests that GDP figures should remain solid. However, the outlook for the latter half of the year appears more challenging as inflationary pressures persist.
