Kazakhstan's industrial sector remains under pressure in May

The business climate in Kazakhstan’s manufacturing sector remained tense in May. Companies reported weaker demand, declining production, and further job cuts, according to the latest Purchasing Managers’ Index (PMI) survey by Freedom Holding and S&P Global.

The Purchasing Managers’ Index stood at 49.0 points in May, virtually unchanged from 48.9 points in April. A reading below 50 signals a contraction in business activity. This marks the fifth consecutive month of deteriorating business conditions, albeit only moderately.

According to the survey, manufacturers again reported a decline in new orders following a brief recovery in April. The surveyed companies cited weaker customer demand and financing constraints as key factors weighing on business.

Production also continued to decline in May, albeit at a slower pace than in the previous month. At the same time, employment fell again as companies adjusted their staffing levels to the subdued business environment.

While cost pressures remained high, they showed initial signs of easing. Both purchase prices and selling prices continued to rise, though the pace of price increases slowed compared to April.

Saltanat Mukhambetaliyeva, Head of Economic Analysis and Research at Freedom Holding, explained:

“In May, Kazakhstan’s manufacturing sector sent mixed signals. On the one hand, the indices for production and purchasing inventories gradually recovered after hitting a low point in March. On the other hand, backlogs of unfulfilled orders and inventories of finished goods declined significantly, reaching their lowest level in seven years.”

This could indicate a shift toward a more flexible production model that is more focused on short-term processes and responds to declining demand as well as increasing logistical and financial constraints.

Despite the current challenges, companies remained generally optimistic about the coming twelve months.

“Business expectations improved significantly compared to the previous month and remained positive. This points to a possible recovery, provided new orders are received and cost pressures continue to ease,” said Mukhambetaliyeva.