Consumers, businesses share mixed sentiments on economy

Bank of Ghana’s latest confidence surveys conducted in June 2023 reflected mixed sentiments as consumers and businesses shared varied opinions about present economic conditions. 

For instance, consumer confidence softened on account of an uptick in prices of goods and services, which also led to some concerns about future economic conditions.

On the other hand, business sentiments remained largely unchanged. Businesses’ optimism about the impact of stable macroeconomic conditions on their operations was offset by concerns about the cost implications of recent tax and utility tariff increases, Bank of Ghana Governor, Dr Ernest Addison, said at a Monetary Policy Committee (MPC) news conference last Monday.

Similarly, Ghana’s Purchasing Managers’ Index (PMI) which is the prevailing direction of economic trends in the manufacturing and service sectors, dipped to 50.4 in June this year from 51.3 in the previous month.

The index, however, remained above the 50.0 mark for the 50th successive month, signalling stable business conditions. 

Real sector

Regarding the real sector, he said the bank’s high frequency real sector indicators all showed signs of recovery in economic activity, albeit at a slower pace in the year to May 2023.

“The updated real Composite Index of Economic Activity (CIEA) contracted by 3.7 per cent in May 2023, compared to a contraction of 5.4 per cent in April 2023, and a growth rate of 1.7  per cent in the corresponding period of last year.

The main indicators that weighed down the Index during the period were port activity, cement sales and credit to the private sector and imports.

Domestic VAT collections, industrial consumption of electricity and exports, according to him, however, improved in the review period.

Money market

On the money market, Governor Addison said interest rate movements showed mixed trends at the short end of the yield curve.

For instance, the 91-day and 182-day Treasury bill rates decreased to 21.77 per cent and 24.58 per cent respectively, in June 2023, from 24.15 per cent and 25.55 per cent respectively, in the corresponding period of 2022.

The rate on the 364-day instrument, however, increased to 28.66 per cent in June 2023 from 27.14 per cent in June 2022.

The Interbank Weighted Average Rate increased to 26.01 per cent in June 2023 from 19.92 per cent in June 2022, underpinned by the increases in the Monetary Policy Rate over the period.

A major worrying trend for businesses was the average lending rates of banks which also increased to 31.15 per cent  in June 2023 from 24.27 per cent recorded in June 2022.

DDEP impact

Dr Addison said in the banking sector, data submitted by banks for the first half of 2023 reflected the lingering effects of the government’s Domestic Debt Exchange Programme (DDEP), notwithstanding the strong rebound in profitability following significant losses incurred at year end 2022 on account of impairments of holdings in GoG bonds.

In spite of the recovery, analysts still believe that there are still significant risks lingering which might affect the banks in the medium to long term.

According to them, the DDEP implementation does not seem over as the government continues to find ways to ensure that its target to bring down its debt in the next few years is achieved.