Growth in Kazakhstan’s service sector slows to a seven-month low
The headline Freedom Holding Corp. PMI Business Activity Index dipped again in October, falling to 50.6 from 51.4 in September, signaling only a marginal rise in Kazakhstan’s service sector output. The pace of expansion eased for the third consecutive month to its weakest level in the current seven-month growth period. Analysts had also noted signs of slowing growth in September.
Although some firms reported an increase in new business, others cited fewer customers, subdued demand and greater competition as factors weighing on activity growth. New business was therefore unchanged overall in October, ending a seven-month run of expansion.
Staff cuts and rising costs
Given subdued demand, surveyed firms resumed workforce cuts in October. Employment reductions have now been recorded in 12 of the last 14 survey periods. The pace of job cuts was modest but the fastest in nearly three years.
Cost pressures intensified further in Kazakhstan’s service sector. Input price inflation was elevated by historical standards and reached a four-month high. More than a quarter of respondents reported higher costs, with many attributing them to rising supplier charges and, in some cases, labor costs.
Service prices also rose faster than in September, though the increase remained notably weaker than input cost inflation. Only 5% of surveyed firms raised their prices during the latest survey period.
Confidence in the outlook for Kazakhstan’s service sector weakened in October, with optimism falling to its lowest level since December. Firms hoped demand would recover and support output growth over the coming year but feared that economic and geopolitical instability could hamper business activity in the near term.
According to Saltanat Mukhambetaliyeva, head of economic research and analytics at Freedom Holding Operations, October saw a further slowdown in Kazakhstan’s service sector growth amid weakening demand and mounting cost pressures. Expectations for the year ahead were weakest among small businesses.
«More moderate consumption growth than last year is limiting firms’ ability to offset rising costs by raising prices. Successive cuts in the base rate are creating conditions to support demand and lower financing costs, but a more confident expansion will require not only sales growth but also firms’ ability to sustain profit margins,» Mukhambetaliyeva said.
Private sector stabilizes overall
Following two consecutive months of decline, the Kazakhstan Composite PMI Output Index signaled stabilization in private sector output in October, rising to 50.0 from 48.9 in September. Service providers continued to report activity growth, although the pace of expansion slowed further. Meanwhile, the manufacturing downturn eased notably from September, with output contracting at its slowest pace in five months.
The decline in private-sector new orders moderated, remaining slight for the third consecutive month. Sector data showed that new business growth had stalled in services, while the contraction in new orders among manufacturers eased.
Employment continued to fall, with October marking the ninth consecutive month of job cuts. The pace of decline accelerated from September but remained modest overall.
Meanwhile, inflationary pressures intensified, with both input costs and selling prices rising in both sectors. However, input cost inflation remained notably stronger than selling price inflation. Business confidence about the year ahead fell to a three-month low.
