Ghana: PMI loses some steam in December
January 4, 2018
The Ghanaian private sector lost some momentum in December, and this was reflected in a fall in the composite Purchasing Managers’ Index (PMI). The index—produced by IHS Markit and sponsored by Stanbic Bank—dropped to 53.5 points, down from November’s 54.8 points. December’s reading marked 23 consecutive months that the index has sat above the 50-point threshold that separates expansion from contraction in business activity. Although the monthly survey of business conditions in the Ghanaian private sector has been conducted since January 2014, the findings were only publicly released from September 2017.
Higher demand spurred an increase in output and new orders from the previous month in December. The rate of expansion in new orders incurred a sharp fall, however, declining to the slowest since September 2016. Growth in output also eased from November but remained resilient. While a slower rise in output and new orders reduced backlogs of work, firms continued to hire more staff to meet the additional output requirements, with the rate of job creation accelerating from the previous month. Expectations of improving demand in upcoming months led firms to build up their inventories. Higher prices for raw materials and a weakening of the cedi against the U.S. dollar boosted input prices again, which rose at the fastest rate in nine months. Firms passed on the extra cost burden to consumers by raising their output prices at the sharpest rate since March 2017.
Commenting on the economy’s prospects for next year, Ayomide Mejabi, Economist at Stanbic Bank, noted:
“This relatively strong PMI reading suggests that while the economy is unlikely to record the same level of growth that it did in the third quarter (9.3% y/y), it should remain robust. Heading into 2018, we expect Ghana’s economy to continue posting strong growth, albeit slightly weaker than in 2017 as the strong base effects wear off.”