Demand in Ghana falters, cost pressures intensify in 2022 Q1 – S&P

Vendors sell products on a busy street in Accra, Ghana, on March 21, 2022. (Photo by Seth/Xinhua)
Vendors sell products on a busy street in Accra, Ghana, on March 21, 2022. (Photo by Seth/Xinhua)

Ghana recorded a second successive deterioration in business conditions as new orders fell for the first time in seven months and output declined sharply, this is according to the March Purchasing Manager’s Index (PMI) released here Tuesday by rating agency S&P.

The S&P Global PMI posted below the neutral value of 50.0 for the second month in succession, indicating a deterioration in business conditions.

According to the global rating agency, Ghana recorded 47.2 PMI for March, down from 49.6 in February, with the rate of decline solid and the steepest since May 2020.

A key drive for the decline, S&P observed could be attributed to a “renewed fall in new orders. The overall rate of contraction was modest, but the first in seven months.”

“Similarly, output levels contracted in March indicating a third consecutive monthly reduction. The rate of decline was marked and among the steepest in the series history, surpassed only by those seen during the onset of the COVID-19 pandemic in March and April 2020.

The global rating agency further reports that all five sub-sectors in Ghana’s economy monitored registered a contraction in output levels during the month of March.

The agricultural sub-sector recorded the steepest fall, followed by services, wholesale and retail, as well as manufacturing and construction.

Shreeya Patel, Economist at S&P said, “Ghana concluded the first of 2022 with the steepest reduction in business conditions for almost two years. Output levels fell at the sharpest rate since the onset of the pandemic while a renewed decline in new orders suggests difficult trading conditions.”

He argued cost pressures was the main driver to the latest deterioration and urged policymakers to keep a close eye on the dollar-cedi exchange rate.

“Rising fuel, transportation, and other input costs were key drivers of the quickest rate of overall input price inflation for almost seven years. Firms will only hope that dollar-cedi exchange rates move favorably, policymakers continue to keep a close eye on inflation levels,” Patel added. Enditem

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