Kazakhstan’s Composite Business Activity Index falls below 50
Business activity growth in Kazakhstan’s services sector slowed significantly in August. Despite continued expansion in services, Freedom Holding Corp.’s Composite PMI Output Index fell below the neutral 50.0 threshold amid a sharp decline in manufacturing output.
Service sector dynamics and new orders
The Services Business Activity Index (PMI) stood at 51.9 in August, down from 54.1 in July. This marked the fifth consecutive month that the index remained above 50. However, the August reading indicated the weakest expansion during the current five-month period of growth.
Service providers said the sector continued to benefit from an influx of new orders, which increased for the sixth consecutive month. Survey respondents attributed the rise to improved underlying demand, marketing efforts and the introduction of new business models. According to Saltanat Mukhambetaliyeva, head of economic research and analytics at Freedom Holding Operations LLP, real estate companies continued to lead growth.
Staff optimization and cost inflation
Despite a steady influx of new business, companies remained hesitant to expand their workforce. Employment in the services sector declined for the seventh consecutive month. Companies attributed the trend to business restructuring, employee furloughs and planned contract terminations. Almost three-quarters of respondents did not expect any significant changes in business activity over the coming year.
Service providers in Kazakhstan continued to face sharply rising input prices in August, driven by higher fuel, energy, transportation and labor costs. However, the pace of output price inflation remained modest and historically subdued, as some service providers chose to absorb part of the cost increase to offer discounts and promotions aimed at boosting sales.
Manufacturing weighs on overall business activity
The Kazakhstan Composite PMI Output Index fell below the neutral 50.0 threshold in August, dropping to 49.3 from 51.5 in July. Although the contraction in output signaled by the index was only slight, it ended a four-month period of growth.
The downturn was driven by a sharper decline in manufacturing output alongside a marked slowdown in services activity. Unlike services companies, manufacturers faced a more rapid rise in input costs and increased their selling prices significantly.
In July, the services sector PMI reached its highest level of the year at 54.1. PMI indexes are measured on a scale from zero to 100. A reading above 50 indicates an increase in activity compared with the previous month, while a reading below 50 indicates a decline.
