Prices of inputs purchased by the private sector rose sharply at end-October 2021, as firms experienced high fuel costs, high freight charges alongside the impact of currency weakness, according to IHS Markit.
Firms factored the rising cost of input prices into the sale of items, thus raising their output charges. Staff costs also increased, albeit modestly. That did not reduce output growth as the pace of growth in output and new orders continued for the second month running.
While new orders increased, general improvements in demand and the launch of new products were behind that of September, 2021. During the period, companies expanded their purchasing and employment levels accordingly, with increased capacity enabling firms to keep backlogs of work minimal, IHS Markit noted.
The headline seasonally adjusted Ghana PMI maintained a high mark, above the 50.0 no change mark, in October 2021, registering 51.0 from 52.6 in the previous period. The reading for the period pointed to a second successive improvement in business conditions, albeit one that was less marked compared to that of September 2021.
The relatively low reading meant that business activity slowed and was marginal compared to that of the previous month. Some firms suggested that difficulties securing materials had restricted the overall increase in output.
Andrew Harker, Economics Director at IHS Markit, commented:
“After returning to growth in September, Ghana’s private sector maintained expansion into October and should be set for a positive end to the year. While output was constrained to some extent by difficulties sourcing materials, firms were able to compensate by expanding capacity through hiring workers and purchasing more inputs. Inflationary pressures remain a key headwind, however, with fuel and freight costs in particular a cause for concern.”
IHS Markit
Lead Times Shortened Markedly for Seven-and-half years
Private sectors’ efforts to expand capacity and keep out growing in line with rising new orders resulted in further increases in both purchasing activity and staffing levels during October 2021. Employment levels rose at the fastest pace since May 2021 while the expansion of purchasing activity was the sharpest since April 2021.
Survey respondents highlighted that suppliers responded well to requests for faster deliveries, thus companies received their purchased items more quickly while payments for inputs were done promptly. This resulted in the shortening of lead times as it was the most marked for seven-and-half years.
Some firms reported that they were able to expand their inventories while other indicated that material price rises hindered them from holding stocks of inputs. On the whole, inventories decreased fractionally.
According to IHS Markit, expectations of further improvements in new orders and hopes of a lack of disruption from the COVID-19 pandemic indicated that companies remained optimistic in the 12-month outlook for business activity.
Approximately three-quarters of respondents predicted a rise in output, with sentiment improving to a three-month high.
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