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Growth in the Sub-Saharan region was quelled at the end of the
first quarter of 2022, as a record increase in selling prices led
customers to rein in their spending in an effort to conserve cash
flow. Businesses were also hit by a sharp rise in input costs as
energy and material prices soared amid the outbreak of war in
Ukraine, whilst renewed lockdowns in Asia began to hinder supply at
companies relying on imports from the region.
The S&P Global Sub-Saharan Africa PMI - a weighted-aggregate
index combining PMI data from seven countries - posted at 52.3 in
March, remaining above the 50.0 neutral mark. However, this
followed the index reaching a 44-month high of 53.8 in February in
response to a loosening of COVID-19 restrictions after the Omicron
wave of the pandemic.
Output growth slows in March
Regional output levels rose at the softest pace in five months
during March, as firms faced a myriad of headwinds to growth. One
of these was the impact of a severe rise in global energy and
commodity prices linked to the Russia-Ukraine war, which drove
business expenses and output prices higher. The result was a marked
slowdown in sales growth and a weaker demand performance in all
seven monitored nations, as surveyed firms often mentioned that
consumers had tightened their budgets over fears of cash shortages
and economic hardship.
Even amidst this, output levels ran below new order inflows in
March as firms themselves battled with higher operating costs and a
reigniting of supply constraints. This included increased delays in
the supply of inputs from Asia due to strict lockdown measures in
the region, hitting companies that oft rely on these imports. The
gap between output and orders was the largest seen for five months
and reflected the trend seen throughout much of 2021 during the
worst of the pandemic-led supply chain crisis.
Of the seven monitored Sub-Saharan African countries, six
recorded a drop in their output index during March, with four now
registering an outright decline. This included Ghana which saw the
steepest decrease in business activity for almost two years. By
contrast, Nigeria and Uganda both registered strong expansions in
output, but even here rates of growth were far slower than in
February.
Selling prices rise at quickest pace in at least eight
years
Illustrating the marked rise in inflationary pressures across
Sub-Saharan Africa, the Output Charges Index increased to its
highest-ever level in March (since data began in January 2014),
signalling an unprecedented uptick in selling prices at private
sector companies. The rate of input cost inflation was also marked
and close to a record high, building on already-severe price
increases seen during the latter stages of the pandemic.
Combined, the two price indices suggested that businesses widely
passed cost rises onto their customers during March, as many
commented on an unwillingness to take a hit to their margins with
operating conditions remaining challenging. This was clearer in
countries such as Nigeria and Ghana, where output charges rose
rapidly and to a greater extent than input prices.
Anecdotal evidence amplified the fact that input costs were
widely driven by underlining price increases in March, rather than
other common factors such as component demand. Energy prices were a
particular concern - related panel comments were nearly eight times
the usual level - as the war in Ukraine led to a surge in fuel
prices and transportation costs across the region. This had a
knock-on effect on shipping: mentions of higher freight costs were
also around eight times the long run average and above the previous
record high in April 2021. Reports of higher raw material prices
were roughly three times the usual amount, also a record high.
Jobs and outlook data provide some
encouragement
Despite these inflationary fears, Sub-Saharan businesses were
often willing to look past the current slowdown in output and plan
for a wider post-pandemic recovery in economic conditions over
2022.
While the Future Output Index slipped for the second month in a
row from January's post-pandemic high in March, it was still
largely in line with the upward trend seen since the middle of
2020. At the same time, the rate of job creation picked up to a
nine-month high, as companies cited efforts to rebuild their
capacity and develop new products.
However, there remains the potential for sentiment to turn sour
if the demand slowdown continues and 'stagflation' beds itself in,
so PMI data and global price indices will be crucial to watch over
the coming months to gauge the true health of the Sub-Saharan
economy.
David Owen, Economist, S&P Global Market
Intelligence
Tel: +44 2070 646 237
david.owen@spglobal.com
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.