Economic conditions for Kazakhstani manufacturers remained challenging in May 2026. The Freedom Holding Corp. Kazakhstan Manufacturing PMI registered 49.0 in May, broadly in line with April’s reading of 48.9 and signaling a modest monthly deterioration in business conditions. The sector’s health has now weakened for five consecutive months.
Production contracts as inventories hit record lows
After a brief increase in April, the new orders index returned to contraction. Survey participants cited declining demand and financing constraints as key factors. The renewed drop in new orders led manufacturers to reduce output for the fifth consecutive month. However, the pace of decline eased compared with earlier months as companies focused on fulfilling existing contracts.
At the same time, efforts to deliver finished goods to customers on time led to a sharp drawdown in inventories. Respondents reported record declines in both work backlogs and finished goods inventories, with both indicators posting their steepest declines since data collection began in March 2019.
Employment in the sector also continued to decline, although the pace of job cuts was the slowest in four months. Respondents attributed the reduction largely to voluntary resignations. While purchasing activity stabilized after four months of contraction, inventories of purchased inputs continued to decline at the fastest rate since March 2023.
Middle East conflict adds to cost pressures
External economic conditions continued to weigh on factory operations. Analysts have previously noted that rising production costs at Kazakhstani manufacturers were driven by the escalation of the conflict in the Middle East. Geopolitical tensions have increased global logistics costs, disrupted supply chains, and pushed up raw material prices.
The May data indicate that these pressures remain in place. Supplier delivery times continued to lengthen due to border delays and logistical disruptions, while higher raw material prices led to a significant increase in input costs. At the same time, inflation in finished goods prices remained moderate. Some companies passed higher costs on to customers, while others were forced to reduce selling prices amid competitive pressures.
«In May, Kazakhstan’s manufacturing sector sent mixed signals. Gradual improvements in output and input inventory indices following the March trough occurred alongside a sharp reduction in operational buffers, as backlogs of work and finished goods inventories fell to seven-year lows. This may point to a shift toward a more adaptive production model focused on short-term processes amid weakening demand and growing logistical and financial constraints. Business expectations over the next 12 months declined notably from the previous month but remained in positive territory, suggesting potential recovery if new orders begin to increase,» Saltanat Mukhambetaliyeva, head of economic research at Freedom Holding Operations, emphasized.
In April, Kazakhstan’s manufacturing sector showed its first signs of stabilization.
