Kazakhstan's service sector continues to grow, while employment remains under pressure

Kazakhstan’s services sector continued to grow in May. This growth was driven by rising new orders and an improved business climate. At the same time, employment declined for the fourth consecutive month, according to the latest Services PMI survey by S&P Global on behalf of Freedom Holding Corp.

The overall business activity index stood at 52.7 points in May, down from 53.9 points in April. The figure thus remained above the 50-point threshold that separates growth from contraction. The data shows that business activity increased for the second consecutive month, although the pace of expansion slowed slightly compared to the previous month.

According to the survey, the companies surveyed reported a sustained increase in new orders, which supported business activity growth across the entire services sector. At the same time, expectations for the coming twelve months improved, indicating confidence regarding future demand trends and the general economic situation.

Inflationary pressure eased somewhat in May. While input costs continued to rise, price growth slowed compared to previous months. Service sector companies also raised their selling prices at the most moderate rate seen in 18 months. This points to a gradual easing of price pressures in the industry.

Despite the positive trend in orders and business activity, the labor market in the services sector remained tight. Companies reduced their workforces for the fourth consecutive month. Job cuts reached their highest level in two and a half years.

Overall, the survey suggests that domestic demand remains robust. At the same time, easing inflation could provide additional support for business performance in the coming months.

Saltanat Mukhambetaliyeva, Head of Economic and Financial Analysis at Freedom Holding Operations, stated:

“The Kazakh service sector continued to grow in May, though there are increasing signs of a shift from an expansionary to a more adjusted business strategy. Despite stable order intake, companies are being forced to cut personnel costs due to declining margins and limited opportunities for price adjustments. This underscores the growing pressure on operational efficiency.”

At the same time, she pointed to existing risks to demand growth: “Declining real incomes and a slowdown in consumer lending continue to weigh on domestic demand. In addition, the effects of rising energy prices are likely to become more noticeable in the coming months. Nevertheless, business expectations for the coming year remain cautiously optimistic, with small and medium-sized enterprises currently showing the greatest resilience.”