• Producer Price Inflation rose to 8.2 percent in July
• Interest rates on 2-year note significantly raised by 200 bps.
• GSE tumbled on profit taking activities.
• Cedi worsened depreciation versus the 3-major trading currencies.
• Brent Crude Oil surged as global supply declines.

Macroeconomic Update

Producer Price Inflation rose to 8.2 percent in July

Rising input cost due to instability of the local currency and the general price upticks witnessed on imported commodities from the international market, has negatively affected production prices in the domestic economy. Producer Price Inflation for the fourth time in a row has risen to settle at 8.2 percent in July, up by 0.5 percentage point with the Mining and Quarry; and Manufacturing sub-sectors being the most affected areas. Producer Price Inflation at the mining and quarry sub-sector thus increased from 5.8 percent in June to 7.5 percent in July, representing 1.7 percentage point increment. The producer price inflation for the manufacturing sector also upticked by 0.2 percentage point to settle at 10.4 percent. The utilities sub-sector however, continued to have a negative inflation as its PPI settled at -0.2 percent in July from a negative figure of 0.4 percent in June. Following the high inter relationship between the producer price inflation and consumer price inflation, there is the need for Government to adopt strong measures to stabilise frequent price upticks at the producer side. This will contribute to stabilising inflation at the consumer end and improve standard of living. Presented below is a one-year trend movement of the PPI. 

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

The week’s auction ended with rate increments on both the short-dated and long-dated treasury securities. The yield on the 91-Day T-Bill increased by 2 basis points to 13.33 percent while the interest rate on the 182-Day surged by a basis points to 13.87 percent. Interest rates on the 2-year note was significantly lifted by 200 basis points to 18.00 percent but yield on other long-dated treasury securities remained the same.

Government raised a total of GH¢642.48 million after accepting all bids tendered by investors. The 91-Day T-Bills was the most accepted bid, constituting 65.22 percent of the total bids accepted. Government anticipates raising GH¢694.00 million bids in the upcoming auction.

The yield curve as illustrated above reflects current investor assessment of the economy and the pricing at which they are willing to dish out funds to invest in the economy while taking into consideration macroeconomic indicators of the country. In comparison with other middle-income economies in African such as Namibia, Mauritius and South Africa, interest rates are a bit higher despite their general down trending. There is therefore the need for a paradigm shift in policy thinking and implementation tailored at attaining a holistic restructuring of the domestic economy for better repositioning of the country in the global competitive market. This will scale down Government’s appetite for borrowing as these measures will improve country profile.

Ghana Stock Exchange

At the close of the week’s trading, equity indices dropped on account of profit taking activities recorded in some blue-chip stocks. The GSE Composite Index thus declined by 0.10 percent to settle at an index level of 2,939.86 points, representing a year-to-date return of 13.96 percent. The GSE Financial Stocks Index similarly shed 0.05 percent on week-on-week basis to 2,732.08 percent, corresponding to a year-to-date gain of 18.24 percent.

Market activities dwindled with fewer volume of shares recorded in comparison with previous week’s outturns. Total traded volume thus stood at 1.31 million shares valued at GH¢5.82 million as against the 2.03 million shares valued at GH¢11.44 million traded in the previous week. Enterprise Group Ltd emerged as the dominant traded stock with 34.76 percent share of the week’s total traded volume. The market capitalization also declined by 0.75 percent to settle at GH¢55,972.06 million.

Stock Price Movements

At the closing bell, fifteen equities saw price changes with seven recording gains whilst the remaining eight recorded price declines. Access Bank Ghana Ltd led the advancers as it recorded a gain of 30 pesewas to settle at GH¢3.80 per share. Total Petroleum Ltd and Standard Chartered Bank Ltd traded 20 pesewas and 10 pesewas higher at GH¢4.51 and GH¢26.11 per share respectively. GCB Bank Ltd and Ecobank Ghana Ltd added 3 pesewas and 2 pesewas to end the week’s trade at GH¢5.32 and GH¢8.98 per share respectively. Other advancers were The Trust Bank (Gambia) Ltd and PBC Ltd.

On the flip side of the market, Fan Milk Ltd emerged as the worst performing stock as it shed 10 pesewas to close the week at GH¢13.60 per share. Ghana Oil Company Ltd and Guinness Ghana Brewery Ltd went down by 5 pesewas and 2 pesewas to trade at GH¢3.15 and GH¢2.48 per share respectively. Ecobank Transnational Incorporated Ltd and SIC Ltd also tumbled by 2 pesewas and a pesewa to settle at 23 pesewas and 24 pesewas per share respectively. Societe Generale Ghana Ltd, Aluworks Ltd and Enterprise Group Ltd also shed prices to end the list of laggards for the week.

Currency Market

Source: Bank of Ghana 24.08.18

The interbank currency market ended with the Ghana cedi losing grounds versus all the three major trading currencies. The US dollar significantly depreciated in the week under review on the international currency market as it dropped to its lowest in five months on multiple factors. Growing political uncertainties as two ex-advisors to US President Donald Trump were criminally convicted which sparked controversies surrounding his Government, minutes from the Jackson Hole summit suggesting a much more sluggish tonne for interest rate hikes consideration and scanty criticism of Fed’s recent interest rate hikes by Trump were some factors that contributed to the significant fall of the dollar. In spite of the dollar’s free fall, the local currency recorded a week-on-week depreciation of 0.10 percent to trade at GH¢4.72 per dollar. The year-to-date depreciation of the cedi versus the dollar thus rose to 6.86 percent.

The British pound sunk to its lowest in a year due to plans by the UK Government to hold an emergency summit in November which signalled a no-deal Brexit. This coupled with the recently adopted punitive actions by the US and China to implement a 25 percent tariffs to the tune of $16 billion worth of goods on each other raised concerns on the likely implications on the UK’s economy. The British pound despite depreciating against a basket of currencies, outperformed the local currency by 1.11 percent. The cedi which closed at GH¢6.07 per pound, had its year-to-date depreciation worsened to 1.67 percent.

The Euro ended much stronger as ill sentiments in the US, minutes from the recent held Jackson Hole Summit, and the more-than-expected inflation readings from the Euro fueled the demand for the single currency. The political uncertainties and interest rates criticism in the US and the no-deal Brexit shifted focus onto the Eurozone which continued to record strong economic readings. Inflation for the bloc rose to its highest in six years after rising to 2.1 percent in July from a previous month reading of 2.0 percent. Current account surplus also remained stable at €24bn in June to lift the value of the single currency. The cedi thus depreciated by 1.97 percent to trade at GH¢5.48 per euro, representing a year-to-date depreciation of 3.51 percent.

International Markets

Trading on the US equity market ended bullish with equity indices rising to its peak since January as dovish interest rates hike signal by the US Chair – Jerome Powell buoyed risk-taking activities among investors. The indication to have gradual interest rate hikes, maintain strong job growth while keeping US inflation under control were measures to halt further rally in the greenback hence, the shift in demand for high yielding assets. The S&P 500 index thus closed with a week-on-week gain of 0.86 percent to an index level of 2,874.69 points. The Dow Jones Industrial Average also upsurged by 0.47 percent to end the week’s trade at 25,790.35 points. 

The London Stock Exchange ended on a positive note, riding on the weakness of the British pound and upbeat performances of mining and oil sector shares. The no-deal Brexit which significantly hampered the value of the British pound on the other hand contributed to the bullish closure of the market due to the high multinational activities on the UK bourse. Expectation-beating activities at the mining and oil sectors arising from signs of demand uptick jointly helped close the FTSE 100 index a quarter of a percentage higher at 7,577.49 points.

The Japanese Stock Exchange snapped a 3-week losing streak to record a weekly gain of 1.49 percent. This was supported by the soft yen and expectation-beating performance by Eisai Ltd whose share price surged by 2.7 percent after recording robust earnings in the second quarter. The Nikkei 225 thus settled at 22,601.77 points.

On the African equity market, trading ended mixed with the Johannesburg All Share Index posting a weekly gain of 3.80 percent to settle at 58,797.68 points. The Nigerian All Share Index also recorded a week-on-week gain of 0.45 percent to end the week’s trade at 35,426.17 points. The Nairobi All Share Index however, appeared on the flip side after slipping by 0.92 percent to settle at 172.98 points.

Source:www.bloomberg.com, & www.investing.com

On the commodities front, Brent crude oil whipsawed from the previous week’s decline as the recent sanction on Iran is beginning to yield value through downsizing of oil shipments. Data suggests a reducing number of loading activities among Iranian tankers as oil shipments has substantially declined by 700,000 barrels per day since the imposition of the sanction in July and this is projected to worsen in the 4^th quarter of 2018. The intended resumption of business activities by China’s Unipec is expected to add to the growing global demand for the energy commodity. Brent crude oil thus rose by $3.99 to trade at $75.82 per barrel.

Gold ended stronger after the week’s trading session on signs of no further interest rate hikes following Fed’s scepticism about the chances of inflation rising above its 2 percent target. The yellow metal thus added $29.80 to trade at $1,206.30 per ounce.

Cocoa notched a week-on-week gain of 11.68 percent, lifted by quality beans concerns expressed by investors. With fewer volumes of rainfall experienced by farmers in Ivory Coast, exporters of the soft crop were very selective in the acquisition of beans from farmers, hence affecting the general supply on the international commodities market. The soft crop thus traded $247.00 higher at $2,362.00 per metric tonne.

Coffee posted a marginal week-on-week loss due to the continued weakness of the Brazilian real as well as production rise in top growers making the soft crop vulnerable to selling pressure. The soft crop thus lost a cent to settle at $1.00 per pound.

Note: The data in this publication is Friday on Friday (w/w).