The consumer confidence index in Ghana increased by 9 points from -22 to -13 in May.
Lower job prospects were seen as a result of stagnation in the national economy.
The spike of inflation leads to a large increase of sentiment on future expenditure.
May 2020 Release: Compared to April, Ghana experienced a slight rise in its consumer sentiment index by 9 points from -22 to -13 in May, which is close to the level seen in January. However, the growth trend has slowed down in comparison to the previous month. The latest increase in consumer sentiment was primarily led by a rise in both the current economic condition index and the consumer expectations index by 13 and 8 respectively.
Lower job prospects were seen as a result of stagnation in the national economy.
Given that Ghana is an import-driven economy, novel coronavirus is likely to have a significant adverse impact on the country’s international trade and reserves. If the Covid-19 situation persists longer than anticipated, the economy could suffer from a significant decline in government revenue and expenditure resulting in potential job losses, which is reflected in the 5 points drop of the consumer sentiment on job prospects.
In view of current events, projected GDP growth is estimated to experience a slump in 2020 at 2.6%. Unemployment is forecast to soar above the 7.2% mark by the end of the year due to job losses in the financial sector clean-up. It is important to note that some people have been laid off owing to the crises in the banking sector and they may never be able to return to their previous high-paying jobs. As a result, structural unemployment will increase.
The spike of inflation leads to a large increase of sentiment on future expenditure.
Despite the drop of sentiment on job prospects, consumers showed an increased propensity towards stocking up on necessities due to panic-buying episodes before fumigation of markets across the country and the partial lockdown of the country’s two largest cities. Inflation reached an over two-year high in May at 11.3%. This change was predominantly driven by a marked increase in housing, water, electricity, and gas prices as well as higher prices for food and non-alcoholic beverages. Intensifying price pressures and stronger inflation resulted in a substantial 45 point growth of consumer sentiment on future expenditure, increasing from 14 to 59 during the period from April to May.
Expectations of personal finance improved due to lower policy rates.
Bank of Ghana has proactively responded to maintain stability in the market. Ghana’s central bank reduced the monetary policy rate from 16% to 14.5% due to inflation after an exaggerated rise in food prices. This is the lowest rate in more than 7 years. This rate reduction will result in slashed lending and deposit rates, which encourages businesses and individuals to make more investment. As a result, personal finance confidence improved by 40 points since March.
By Heather Yan, Economic Intelligence Group at KASI.
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About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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