Business confidence as measured by the index derived from the Bank of Ghana’s (BoG) Business Confidence Survey has indicated a recovery in the confidence of the business sector.
Following dampened sentiments of business during the first survey for this year, in February 2019 at 93.5 percent, the latest survey, conducted in April 2019 improved the index to 94.3 percent.
The rebound in sentiments follows the recovery of cedi from its recent sharp depreciation and favourable growth prospects, said Dr. Ernest Addison, Governor of the BoG on Monday.
The Survey, which forms part of the central bank’s real sector indicators, depicts a slight increase of 0.8 percentage points in April compared to the 3.4 percentage points fall recorded in the previous survey in February.
This economic indicator measures the amount of optimism or pessimism that business managers feel about the prospects of their companies, as well as providing an overview of the state of the economy. Improved optimism, if supported by the availability of adequate financing and expectations of sufficient consumer or business to business demand, as the case may be, can be expected to translate into increases in production capacity or at least increased utilization of existing capacity.
In sharp contrast, the BoG’s consumer confidence survey showed dampened confidence as reflected by a 2.0 percentage point fall in the confidence index to record 96.6 percent, following consistent growth since the 92.3 level recorded in October 2018.
The Consumer Confidence Survey reflects prevailing consumer sentiments as expressed by households and likely developments in those sentiments for the months ahead.
Consumer sentiments weakened slightly as a result of recent increases in prices of goods and services as captured by rising year on year headline inflation from a trough of 9.2 percent to 9.5 percent for April. Weaker consumer sentiments will make businesses – especially those who supply consumers rather than engage in business to business transactions along the supply chain – wary of making investments in increased output in case it is not matched by expanding demand from consumers
Composite Index of Economic Activity
However, the Bank’s updated Composite Index of Economic Activity (CIEA) shows evidence of increased economic activity with a year on year growth of 4.0 percent in March 2019, up from 2.9 percent a year earlier. This suggests faster economic growth this year than last year and indeed justifies the increased optimism of businesses as to their prospects going forward.
Indeed, the BoG Governor noted that, the robust pace of economic activity is supported by improved sentiments from businesses, due to the restoration of the cedi’s exchange rate and expectations of faster economic growth.
“Growth remains relatively strong as the output gap continues to close,” he said.