• Consumer Price Inflation dropped for the first time after rebasing
• Producer Price Inflation dropped to 9.7 percent in September
• IMF drops growth forecast for 2019
• Yields on 182-Day and 364-Day T-Bills eased.
• Ghana Stock Exchange ended the week in the red.
• Ghana cedi advanced against US dollar.
• Brent crude oil tumbled on fears of global demand shortfall.

Macroeconomic Update

Consumer Price Inflation dropped for the first time after rebasing

Ghana’s consumer price inflation recorded a decline in September, a month after rebasing to settle at 7.6 percent, down by 0.2 percentage point from the previous month’s reading. The decline steamed from reduced inflationary pressures within the non-food sector of the economy which had seven out of the twelve major items registering lower inflation rates. Some of these sub-sectors included clothing & footwear, transport, personal care & social protection, restaurant and accommodation services etc. Inflation for the non-food sector dropped by 0.4 percentage point to settle at 7.0 percent in September. The CPI for the Food and non-alcoholic sector however, surged by 0.3 percentage point to 8.5 percent driven by prices of fruits & nuts and coffee & coffee substitute. Presented below is a one-year trend analysis of the CPI:

   Producer Price Inflation dropped to 9.7 percent in September

The producer price inflation halted its uptrend, recording its first decline in four months. The PPI settled at 9.7 percent, representing a 0.5 percentage point decline from the previous months reading of 10.2 percent. The decline was largely due to lower input cost at the manufacturing sector which had its PPI dropping by 0.9 percentage points to settle at 4.9 percent. The PPI for the Mining and Quarrying sub-sector, however, rose by 0.6 percentage point over the August’s value of 36.5 percent to 37.1 percent. The PPI for the utilities sub-sector also rose by 0.1 percentage points to 6.8 percent in September.

IMF drops growth forecast for 2019

The International Monetary Fund has downwardly revised its growth expectation for the global economy and Ghana for the year 2019 and 2020. The global economy which was tipped to slow to 3.3 percent at year-end is now projected to contract by 0.3 percentage point as it settled at 3.0 percent in 2019 – the lowest performance since the global financial crisis in 2017. Growth forecast for 2020 has also being slashed by 0.2 percentage point to 3.4 percent.

The downward revision of the 2019 and 2020 growth expectations are as a result of the heightened trade tension between the US and other advanced economics such as China, Eurozone and among others.  Issues such as idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity and aging demographics in advanced economies were cited by the IMF as potential growth drags.

In the advanced economies, growth is projected to drop to 1.7 percent in 2019, against the 2.3 percent recorded in 2018. Similar outturns are expected in the emerging and developing economies as economic growth slows to 3.9 percent in 2019 but projected to pick up in 2020 to 4.6 percent following a projection of a recovery in Turkey, Argentina and Iran.

In Sub-Saharan Africa, economic growth which was expected to be 2.8 percent in 2019 was cut by 0.2 percentage point to 2.6 percent following downward revision in major economies in the region. The South African economy is projected to be grow only by 0.8 percent contrary to the 1.3 percent for the year whereas the Nigerian economy will also grow by 2.0 percent in 2019 against a previous forecast of 2.1 percent. On the back of this, Ghana’s economy is expected to moderate by 1.3 percentage points to 7.5 percent in 2019.

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.

At the close of the week’s auction, the yield on the 182-Day T-Bill dropped by 2 basis points to settle at 15.12 percent. Interest rates on the 364-Day T-Bills also eased by a basis point to settle at 17.90 percent but that on the 91-Day T-Bill remained unchanged at 14.69 percent. The yield on the treasury notes and bonds however, remained unchanged after the week’s auction as they were not scheduled for the week’s auction.  

Government accepted GHS667.27 million worth of bids out of the GHS746.57 million bids tendered at the auction. The amount raised was in excess of the week’s target of GHS632.00 million and outstripped the GHS600.77 million raised in the previous week’s auction. The 91-Day T-Bill was the most accepted bids by Government, constituting 79.19 percent of the total bids purchased. In the upcoming auction, an amount of GHS762.00 million is expected to be raised by the Government from the sale of the 91-Day and 364-Day T-Bills.  

Illustrated above is the term structure of the Government of Ghana treasury securities. It sustained its normality following the insignificant rate adjustment observed in the week’s auction and the continued investor confidence in the domestic economy as the Bank of Ghana strong adherence to its policy directive of making long dated treasury securities much attractive to their short-dated counterparts.

Ghana Stock Exchange

The Ghana Stock Exchange ended the trading week in the red as ill-sentiment continued to persist on the market despite corporate actions by some listed market. Appointment of non-executive members by Société Générale Ghana Ltd, dividend payment of preference shares of GHS0.047 by Standard Chartered Bank Ltd and the upcoming 3^rd quarter financials were unable to revived market sentiment. The GSE Composite Index thus posted a week-on-week decline of 0.57 percent as it settled at 2,161.65 points, corresponding to a year-to-date loss of 15.96 percent. The GSE Financial Stocks Index also registered a week-on-week decline of 1.15 percent to settle at 1,824.40 points, representing a year-to-date loss of 15.29 percent. 

Total stocks traded in the week under review stood at 0.72 million valued at GHS1.21 million. This compared favourably to the previous week’s outturn of 0.33 million valued at GHS0.30 million. Enterprise Group Ltd led the activity chart as it accounted for 73.37 percent of the total traded volume. Market capitalization recorded a week-on-week decline of 0.21 percent as it settled at GHS55,641.86 million.

Stock Price Movements

At the pairing of the week’s opening and closing prices only five equities altered their prices. No advancer was recorded. Enterprise Group Ltd, however, emerged as the worst performing stock, it trimmed 27 pesewas to close at 1.63 per share. CAL Bank Ltd and Guinness Ghana Breweries Ltd lowered their share prices by 7 pesewas and 3 pesewas to trade at 75 pesewas and GHS1.75 per share respectively. GCB Bank Ltd and Société Générale Ghana Ltd shed 2 pesewas each to close at GH4.88 and 58 pesewas per share respectively.

Currency Market

Source: Bank of Ghana 18.10.19

The Ghana cedi slipped against the Pound and the Euro but appreciated versus the US Dollar on the interbank currency market. The US Dollar weakened as string of weaker-than-expected economic data worsened investors’ fears of an imminent economic recession. Housing starts for September dropped to its lowest in 12 years as it eased by 9.4 percent from 1.39 million in August to 1.26 million in September. U.S. factory output data also dropped to a 5-month low in September as it contracted by 0.5 percent from the previous months outturn. The US dollar thus depreciated by 0.01 percent to sell at GHS5.32 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 9.42 percent.

The British Pound hovered near 5-months highs spurred by easing investors’ worries as Prime Minister-Boris Johnson and European Union officials agreed to a draft Brexit deal allaying fears of Britain crushing out of the European Union. The Pound’s gains were, however, limited by scepticism on the draft which is yet to be approved by the UK Parliament with some section of market calling for its rejection citing lack of clarity on VAT and custom related issues. The British pound thus recorded a week-on-week gain of 1.64 percent to sell at GHS6.87 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 10.10 percent. 

The Euro rose to seven-weeks high on the international currency market as upbeat developments surrounding the Brexit negotiations following the European union leader’s approval of the draft Brexit deal, lifted the value of the shared currency. The Euro’s surge also driven by the weakening of the US Dollar owing to a plethora of soft economic data in the world’s largest economy, United States of America signalling signs of economic recession. The Euro thus ended with a week-on-week appreciation of 0.93 percent as it traded at GHS5.93 on the interbank currency market, widening the year-to-date depreciation of the cedi to 7.02 percent.

International Markets

The US equity market was supported by bullish third-quarter earnings reports from some listed companies such as Coca Cola Co. and American Express Co. as well as a weakened US Dollar following downbeat economic data which sparked risk taking activities among investors. Wall street’s gains were however trimmed by concerns of slowing global economic growth. The S&P 500 thus recorded a weekly gain of 0.54 percent to settle at an index level of 2,986.20 points. The Dow Jones Industrial Average, on the flip side, registered a week-on-week loss of 0.17 percent to settle at 26,770.20 points.

The London Stock Exchange closed lower in the week under review as traders exercised circumspection ahead of the UK Parliament’s vote on approval for the draft Brexit deal reached with the European Union by Boris Jonson’s Government following positive developments surrounding the Brexit negotiation. The FTSE 100 thus traded 1.12 percent lower in the trading week to close at 7,138.00 points.

The Asian Stock market posted gains driven by positive employment data indicating that China created 10.97 million new jobs in September; Jobless rate held steady at 5.2 percent and migrant workforce upped from 182.48 million to 183.36 million. The Nikkei 225 thus posted a weekly gain of 3.18 percent to end the trading week at 22,492.68 points.

On the African market, the Johannesburg All Share Index surged by 0.33 percent to close the week’s trading at 55,722.79 points. Similarly, the Nairobi All Share Index soared by 0.49 percent to end the trading week at 148.36 points. On the other hand, Nigerian All Share Index extended its losses registering a weekly loss of   0.32 percent to close at 26,448.62 points.

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

Brent crude oil headed southwards spurred by supply glut concerns and weakening demand on the international commodities market. Data released by the Energy Information Administration (EIA) indicated a 9.3 percent rise in stockpile on the global market, outstripping the current demand on the commodities market. Concurrently, China – the world’s largest importer of crude oil, had its economy contracting by 6 percent due to lower activities at its industry and manufacturing sectors, raising investors fear. Brent crude oil thus went down by 32 cents to trade at $60.19 per barrel.

Gold closed the trading week on a positive note riding on the global economic slowdown and the rising doubts on UK’s parliament ratifying the draft Brexit deal reached with the EU. Downward growth revision by the International Monetary Fund for both advanced and emerging and developing economies amidst downbeat economic readings from US and China affected risk taking sentiment. Gold thus rose by $3.85 to trade at $1,492.55 per ounce.

Cocoa buoyed its value on the international commodities market lifted by Ivory Coast and Ghana’s commitment to adopt the living income differential (LID) to improve the livelihood of farmers while controlling supply. Cocoa thus gained $15.00 to trade at $2,521.00 per metric tonne.

Coffee lost marginally fuelled by good weather conditions in Vietnam and Brazil and speculation of higher production in the 2020/21 crop season. Coffee lost a cent to close at 93 cents per pound.