The Ghanaian private sector experienced an accelerated growth in job creation, surpassing several month highs, including rise in output and new orders for year-end 2021, according to IHS Market, a leading global research firm.

This positive outturn translated into firms having high hopes and a confident outlook for business activity in 2022. Meanwhile, inflationary pressures remained marked, with higher input costs feeding through to increases in selling prices. In fact, this was not surprising as inflationary pressures are mostly characteristic of the festive season.

The headline seasonally adjusted Ghana Purchasing Manager’s Index (PMI) rose to a three-month high of 51.8 in December 2021 from 51.0 in November 2021. The reading signaled a modest improvement in the health of the private sector, and extended the current sequence of expansion to four months.

There were widespread reports of improving customer demand in December, 2021 which fed through to increases in both output and new orders. New business activity rose for the fourth month running, and at a solid pace that was the sharpest since September 2021.

While business activity went up, the growth of new business fed some pressure on operating capacity at the end of the year. This translated into an increase in backlogs of work, being the first time in five months.

Also, the rate of building up inventories was only marginal as firms made efforts to manage workloads. These efforts were characterised by further hiring and expanded purchasing activity. Employment increased at a solid pace, with the rate of job creation quickening for the third month running to the strongest since February 2020.

Higher Prices Remain Major Constrain for Growth

Firms indicated that they were able to fill previously vacant positions. The rate of growth in input buying, however, was the most marked in 14 months.

Despite higher purchasing and shorter delivery times as suppliers responded well to requests, stocks of purchases decreased for the second time in the past three months.

Higher prices for inputs meant that firms were reluctant to stockpile items and opted to simply purchase those inputs necessary to support activity. Purchase costs continued to rise sharply in December, 2021, with the rate of inflation posting above the average for 2021 as a whole. Higher fuel prices, currency weakness and increases in costs for raw materials all added to purchase prices, according to respondents.

Staff costs also rose amid hiring activity and upwards revisions to pay in line with increasing workloads. With input costs continuing to rise sharply, companies increased their own selling prices accordingly.

Looking ahead, firms expect demand improvements to continue over the course of 2022, supporting confidence in the outlook for business activity. Hopes that the COVID-19 pandemic will remain under control also contributed to optimism. Sentiment dipped from November, 2021 but was still in line with the series average.

Commenting on the latest survey results, Andrew Harker, Economics Director at IHS Markit, said:

“Ghana’s private sector moves into 2022 with growth building momentum. Particularly encouraging was the trend in employment in December with firms hiring staff to the greatest extent since the COVID-19 pandemic began as they remain confident regarding workloads in the year to come.

“While the near-term outlook appears relatively rosy, the COVID-19 pandemic still has the potential to throw things off course, particularly given the emergence of the Omicron variant.”
Andrew Harker, IHS Markit