Kazakhstan’s service sector returned to solid growth in April, according to the latest Freedom Holding Corp. PMI, signaling a rebound in business activity at the start of the second quarter.
Surge in new business drives growth
The Freedom Holding Corp. PMI Business Activity Index rose to 53.9 in April, up from 49.2 in March, moving back into expansion territory for the first time in three months. The reading points to a strong increase in service sector output, with growth reaching its fastest pace in nine months and exceeding the long-term average.
The rebound was largely driven by a rise in new business, as companies reported a surge in incoming contracts.
Employment continues to decline
Despite stronger demand, employment in the sector continues to fall. Companies have been cutting staff since February, citing internal restructuring and the closure of unprofitable business lines.
At the same time, service providers reported rising input costs and upward pressure on wages. Inflation has approached its January peak. However, many companies are limiting price increases to remain competitive and support stable sales.
What’s behind the growth
According to Saltanat Mukhambetalieva, head of economic research at Freedom Holding Operations, such strong monthly growth is unusual for the local market and is typically seen during periods of recovery following global shocks.
Currently, business activity is concentrated in real estate and professional services. The real estate sector has been supported by a 16% year-on-year increase in mortgage lending. Meanwhile, consumer services and transportation remain weak.
Recovery after tax shock
The composite business activity index, which covers all sectors of the economy, also rose to 51.1, indicating modest overall growth. The improvement was driven entirely by the service sector, offsetting continued weakness in manufacturing.
The sector’s recovery follows a period of strain after changes to the value-added tax earlier this year. Businesses are now cautiously optimistic, expecting further improvement over the next 12 months and planning to invest in new equipment.
