At the beginning of the third quarter, Kazakhstan’s services sector Purchasing Managers’ Index (PMI) rose to 54.1, reaching its highest level in 13 months. Despite a significant increase in new orders, the sector recorded a slowdown in business expectations and continued job cuts.
Activity trends and demand factors
According to a survey by Freedom Holding Corp., the PMI rose for the second consecutive month, up from June’s reading of 53.5. The indicator has remained steadily above the baseline level of 50, signaling monthly expansion in the services sector since April.
The inflow of new orders became the main driver of growth, recording the fastest increase in the past three months. Business representatives attributed the positive trend to rising tourist flows, the introduction of new business models and an expanding customer base.
Job cuts and declining optimism
Against the backdrop of rising output, Kazakhstani service providers reported worsening expectations. The level of business optimism fell to its lowest point in six months. Only 16% of respondents expect activity to increase over the next 12 months. Entrepreneurs’ concerns are linked to macroeconomic uncertainty, high competition and changes in tax legislation.
At the same time, the sector has recorded declining employment for the sixth consecutive month. Employers attribute the job cuts to branch closures, company restructuring and the transition of employees to four-day workweeks.
Price pressure and analysts’ assessment
Cost inflation — driven by higher prices for raw materials and supplier services — was the weakest in four months during the reporting period. Nevertheless, increased operating costs continue to be passed on to consumers through higher charges.
Saltanat Mukhambetaliyeva, head of economic research and analytics at Freedom Holding Operations LLC, highlighted the instability of the current trend and the growing imbalance between sectors.
«Kazakhstan’s service sector recorded a further expansion in headline business activity during July, logging its highest level of optimism in recent months and widening the growth divergence with manufacturing industries. As a result of this starkly contrasting performance, the spread between the business activity indices of service and manufacturing firms reached an all-time high. Nevertheless, the latest upturn in services looks somewhat fragile. Despite a solid inflow of new orders (excluding the transport and storage segment), payroll numbers across the sector continued to fall. Other underlying triggers include sustained, historically high pressure on margins — albeit easing from a three-month peak — alongside a sharp deterioration in 12-month business confidence, which marked the steepest monthly correction seen in the past ten months,» she said.
The services sector PMI reached 53 points in June. The latest data confirm that the upward trend in the sector is continuing.
At the same time, analysts note that the gap between the rapidly growing services sector and the stagnating manufacturing industry continues to widen, creating an imbalance in the structure of the country’s economic growth.
