IS THE ECONOMY IN THE USA REALLY AS GOOD AS IT SEEMS?

NORMALLY, I ONLY WANT TO COMMENT ON ECONOMICAL, FINANCIAL, AND INVESTMENT ISSUES IN SUB-SAHARAN AFRICA, ESPECIALLY GHANA. BUT THIS TIME, MY INNER ME FORCES ME TO COMMENT ON SOMETHING ELSE. THIS SOMETHING ELSE IS THE ECONOMICAL SITUATION IN THE USA, AT LEAST PART OF IT. Continue reading IS THE ECONOMY IN THE USA REALLY AS GOOD AS IT SEEMS?

SUMMARY OF ECONOMIC AND FINANCIAL DATA – PART 2

IN THE LAST PART OF MY ARTICLE SERIES THAT DEALS WITH THE ECONOMIC AND FINANCIAL SITUATION AND DATA IN GHANA, I WILL PRESENT THE FOLLOWING ISSUES:
—EXTERNAL SECTOR DEVELOPMENTS;
— GOVERNMENT FISCAL OPERATIONS;
— MONETARY INDICATORS;
— BANKING SECTOR INDICATORS; AND .
— STOCK MARKET PERFORMANCE. Continue reading SUMMARY OF ECONOMIC AND FINANCIAL DATA – PART 2

SUMMARY OF ECONOMIC AND FINANCIAL DATA JULY 2019

THE SECOND AND THIRD PART OF MY ARTICLE ABOUT THE MONETARY POLICY COMMITTEE MEETING OF THE BANK OF GHANA IN JULY 2019 DEALS WITH THE SUMMARY OF ECONOMIC AND FINANCIAL DATA. FOLLOWING IS THE ANALYSIS OF DATA CONCERNING PRICE DEVELOPMENTS, REAL SECTOR INDICATORS, MONEY MARKET RATES, INTERBANK FOREIGN EXCHANGE RATES, AND. AND COMMODITY PRICES.THE THIRD PART WILL ANALYSE THE REMAINING DATA. THESE WILL BE EXTERNAL SECTOR DEVELOPMENTS, GOVERNMENT FISCAL OPERATIONS, MONETARY INDICATORS, BANKING SECTOR INDICATORS, AND STOCK MARKET PERFORMANCE.

1) PRICE DEVELOPMENTS
PRICES WENT INTO THE SOUTH DIECTION IN THE MONTH OF JUNE, WHICH IS UNDR REVIEW IN THE DATA COMPILATION. THE ANNUAL CONSUMER PRICE INFLATION RATE WAS 9.1%, WHICH WAS THE LOWEST SINCE JANUARY 2019. INTERESTINGLY, THE FOOD PRICES ONLY ROSE BY ONLY 6.5%. THE FACT THAT IT IS THE LOWEST RATE OF THE YEAR HAS SURELY SOMETHING TO DO WITH THE SEASON. THE RATE OF THE SAME MONTH IN THE LAST YEAR WAS ALSO RATHER LOW (7.3%). BUT THAT THE RATE THIS YEAR IS ALSO SIGNIFICANTLY LOWER THAN LAST YEAR IS REMARKABLE.
COMPARED WITH THE FOOD PRICES, THE RATE FOR NON-FOOD PRICES WERE RATHER ON THE HIGH SIDE WITH 10.3%.BUT EVEN THIS FIGURE WAS LOWER THAN THOSE OF THE LAST TWO MONTHSJ. THIS ALLOWS THE CONCLUSION THAT FOLLOWING THE SAME MONETARY AND FISCAL POLICY, THE INFLATION RANGE OF 8+/-2% WILL NOT BE BROKEN ON THE UPPER SIDE.
AS THE CORE MEASURES OF INFLATION SHOW THE SAME TENDENCY, WE DON’T NEED TO ANALYSE THESE FIGURES MORE EXTENSIVELY.

2) REAL SECTOR INDICATORS
IN THIS SEGMENT, THREE COMPONENTS ARE IMPORTANT, OF WHICH TWO SHOW POSITIVE RESULTS, AND ONE MIXED RESULTS:

a) COMPOSITE INDEX OF ECONOMIC ACTIVITY (CIEA)
THE CIEA SHOWED SOME PACE IN THE LAST MONTH ON REVIEW (05/19), NOMINAL AS WELL AS REAL. THE NOMINAL INDEX RATE ROSE FOR THE 5TH TIME IN A ROW, AND THE GROWTH RATE WITH 9.1% PICKED UP AGAIN, AFTER A SIGNIFANT DECREASE IN THE MONTH BEFORE. THE REAL GROWTH RATE ALSO INCREASED AGAIN AFTER A DECREASE THE MONTH BEFORE, AND ENDED AT 3.2%.
WE CAN EXPECT THAT THE ECONOMIC ACTIVITY WILL REMAIN IN POSITIVE TERRITORY IN THE FORESEEABLE FUTURE, AS THE GOVERNMENT’S INITIATIVES LIKE 1 DISTRICT-1 FACTORY AND OTHERS WILL HAVE AN ECONOMIC IMPACT.

b) GROSS DOMESTIC PRODUCT
ALTHOUGH THE INTERNATIONAL MONETARY FUND (IMF) JUST LOWERED ITS EXPECTATIONS GLOBALLY BY 0.1%, AND THE GROWTH RATE FOR SUB-SAHARN AFRICA IS AN EXPECTED 3.4%, GHANA SHOWED AN IMPRESSIVE 6.7% IN THE FIRST QUARTER OF THE YEAR. (ONLY AN ADDITIONAL NOTE: THE IMF EXPECTS A GDP GROWTH RATE FOR NIGERIA OF 3.4%). FURTHERMORE, THE EX-OIL GROWTH OF THE GROSS DOMESTIC PRODUCT WAS 6.0% IN THE FIRST QUARTER OF THE YEAR. THAT SHOWS THAT THE ECONOMY IN GHANA DOES NOT ONLY DEPEND ON OIL.IT SHOWS FURTHER THAT IF THE OIL PRICE WILL NOT PLUNGE EXTREMELY, A MODERATE DECREASE OF THE GLOBAL OIL PRICE WON’T AFFECT THE ECONOMY TOO MUCH
EVEN IF WE CONSIDER THAT THE GROWTH RATE MIGHT SLOW DOWN IN THE NEAR FUTURE, IT WILL SURELY BE CONSIDERABLY HIGHER THAN THE EXPECTED GROWTH RATE FOR SUB-SAHARAN AFRICA.THIS IS IN LINE WITH FORECAST OF THE IMF IN REGARD OF GHANA.

c) CONSUMER AND BUSINESS CONFIDENCE INDEX
THE BUSINESS CONFIDENCE INDEX WENT DOWN IN THE LAST MONTH AND ENDED AT 94.1.
OPPOSITE TO THAT, THE CONSUMER CONFIDENCE INDEX INCREASED AND ENDED SHORT BELOW THE 100 MARK AT 99.2.
THE UP-AND-DOWN MOVEMENTS OF BOTH INDEXES IN THE LAST MONTHS SIMPLY SHOW ONE THING. THAT IS THAT BOTH BUSINESSES AND CONSUMERS ARE NOT QUITE SURE WHICH WAY THE ECONOMY WILL GO IN FUTURE. IT WILL TAKE SOME MONTHS OF POSITIVE DEVELOPMENT TO CONVINCE BOTH GROUPS TO HAVE MORE CONFIDENCE IN THE ECONOMY IN GHANA.

3) MONEY MARKET RATES
THE MONEY MARKET RATES ARE CALCULATED ON MONTHLY AVERAGES.
AS ALREADY MENTIONED, THE BANK OF GHANA LEFT THE POLICY RATE AT 16.0%. THAT MEANS THAT IT REMAINED THE SAME SINCE THE BEGINNING OF THE YEAR; IN MY OPINION A SIGN OF STABILITY.

BOTH TREASURY INSTRUMENTS AND THE SECONDARY MARKET INTEREST RATES WENT DOWN. THIS MIGHT NOT PLEASE INVESTORS IN THE MONEY MARKET. USUALLY, WHEN THOSE INTEREST RATES ARE GOING SOUTHWARDS, INTEREST RATES IN DEPOSITS ARE ALSO FOLLOWING SOON – AND THEY ALREADY HAVE. THE FIGURES SHOW THAT THE INTEREST RATES FOR DEPOSITS AND TIME DEPOSITS REMAINED THE SAME; BUT AT LEAST FOR RURAL BANKS, DEPOSIT INTEREST RATES WENT DOWN RECENTLY.IN THE CREDIT MARKET, AVERAGE LENDING RATE AND THE REFERENCE RATE HAD A SMALL UPWARD TREND.

IN THE FOREIGN CURRENCY MARKET, THE CEDI CONTINUED THE DOWNWARD TREND, ALTHOUGH SIGNIFICANTLY SLOWER.
THE CEDI LOST 8.23% AGAINST THE US-DOLLAR YEAR-TO-YEAR, 5.5% AGAINST THE BRITISH POUND, AND 6.4% AGAINST THE EURO.
ALTHOUGH SURELY NOT SATISFACTORY, WE CAN SEE – ALONGSIDE THE BANK OF GHANA – A LITTLE CALM IN THE STORM OF THE CURRENCY MARKET. IN THE LAST DAYS, THE CEDI WAS RELATIVELY STABLE, WHICH GIVES REASON FOR THE HOPE THAT THE CEDI WILL REMAIN ON THIS LEVEL AT LEAST FOR SOME TIME NOW.
NEVERTHELESS, FISCAL POLICY MEASURES CAN BE TAKEN TO STABILISE THE CURRENCY, AND PARTLY, GOVERNMENT HAS ALREADY STARTED. THERE ARE MEASURESS TO REDUCE IMPORTS FURTHER, FOR WHICH WE MUST MOSTLY PAY IN US-DOLLARS. REVENUES MUST INCREASE FOR US TO BE ABLE TO DEPEND MORE ON THE LOCAL CURRENCY..
IF SUCH MEASURES WILL COME INTO PLACE SUCCESSFULLY, WE WILL SEE A FURTHER STABILISATION OF THE CEDI.

4) COMMODITY PRICES
THE COMMODITY PRICES HAD A MIXED DEVELOPMENT. THE GOLD PRICE INCREASED SIGNIFICANTLY IN THE LAST MONTH. THIS IS MOSTLY BASED ON FEARS OF AN ESCALATION OF THE TRADE WAR BETWEEN THE US AND CHINA. A SECOND REASON IS THE EXPECTED DOWNTURN OF THE GLOBAL ECONOMY. INVESTORS ARE LOOKING FOR “SAFE HAVENS”, AND GOLD IS ONE.
THE PRICE FOR BRENT CRUDE OIL IS ALSO COMPARATIVELY HIGH AT THE MOMENT. BUT THE PRICE FOR THIS COMMODITY IS A DOUBLE-EDGED SWORD: ON ONE HAND, THE PRICE IS HIGH BECAUSE OF GROWING TENSIONS BETWEEN THE USA AND IRAN.

INVESTORS BELIEVE THAT THESE TENSIONS WILL CUT THE SUPPLY OF OIL, AND THEREFORE THE PRICE RISES. ON THE OTHER HAND, A SLOWDOWN OF THE GLOBAL ECONOMY COULD MEAN A LESSER DEMAND FOR OIL, AND THAT COULD MEAN A LOWER PRICE FOR OIL. CONSEQUENTLY, GOVERNMENT SHOULD PREPARE FOR LOWER OIL PRICES IN THE NEAR FUTURE. THE LOWER DEMAND WILL SURELY OUTCLASS THE TENSION RISKS AT THE LONG RUN. FORTUNATELY, THE DEPENDENCE ON HIGH OIL PRICES DOESN’T SEEM TO INFLUENCE THE GDP GROWTH TOO MUCH.

THE PRICE FOR COCOA ALSO WENT UP CONSIDERABLY IN THE LAST MONTH, ALTHOUGH THE REALISED PRICE WENT DOWN SOMEWHAT. BUT I AM CONVINCED THAT THE RECENT AGREEMENT WITH COTE D’IVOIRE ABOUT THE COOPERATION CONCERNING COCOA WILL GO A LONG WAY TO STABILISE THE COCOA PRICE ON A HIGH LEVEL FOR GHANA.

THE LAST PART OF MY ARTICLE WITH THE SUMMARY OF THE LAST FIVE ECONOMIC AND FINAANCIAL DATA WILL FOLLOW ON MONDAY. DOWNLOAD THE PRESS RELEASE AND THE SUMMARY OF ECONOMIC AND FINANCIAL DATA AT THE END OF THIS ARTICLE.

STAY TUNED!

MPC Press Release-July 2019         Summary_of_Economic_Financial_Data_July_2019

JULY MONETARY POLICY MEETING BANK OF GHANA – A REVIEW (PART 1)

LAST WEEKEND, THE MONETARY POLICY COMMITTEE OF THE BANK OF GHANA HELD ITS JULY MEETING.FOLLOWING IS A BRIEF REVIEW OF THE MEETING, TOGETHER WITH AN OVERVIEW OF THE CURRENT ECONOMIC AND FINANCIAL DATA. BECAUSE  OF THE LENGTH OF THE ARTICLE, I WILL SEPARATE IT INTO THREE PARTS. THIS FIRST PART WILL COVER THE PRESS RELEASE OF THE MONETARY POLICY COMMITTEE, WHILE THE SECOND AND THE THIRD PART DEAL WTH THE SUMMARY OF ECONOMIC AND FINANCIAL DATA. YOU CAN DOWNLOAD BOTH DOCUMENTS AT THE END OF THIS ARTICLE, OR FROM http://www.bog.gov.gh Continue reading JULY MONETARY POLICY MEETING BANK OF GHANA – A REVIEW (PART 1)