September readings of the PMI business activity index from Freedom Holding Corp. point to a further slowdown in growth in Kazakhstan's services sector. A slight rise in activity was accompanied by weakening inflows of new orders and the weakest inflation in service prices since December 2020. This was reported by Qazaqyia.kz citing Kursiv Media.
September PMI readings
The headline PMI index stood at 51.4 points in September, compared with 51.9 points in August. This figure indicates a slight upturn in business activity. Analysts note that growth has been recorded monthly since April, but its pace has slowed for a second consecutive month and has become the weakest over the entire period.
"According to the survey, the overall rate of growth was held back by a reduction in the number of new orders and a temporary suspension of operations at some companies, as well as the loss of clients," the study says.
Employment and cost dynamics
At the same time, the sector's sustained positive momentum ensured a resumption of hiring. The expansion of staffing ended a seven-month period of job cuts, although employment growth proved insignificant.
In September, a substantial rise in resource costs continued. The report's authors emphasize that the increase in costs in the services sector was driven by higher raw material prices and price increases on the part of suppliers.
At the same time, Kazakh companies were reluctant to pass these expenses on to consumers. Service prices rose minimally, and their rate of growth became the weakest in almost six years.
Expert comment
Saltanat Mukhambetaliyeva, head of economic research and analytics at Freedom Holding Operations LLP, commented on the current figures.
"The services sector continues to act as the main stabilizer of Kazakhstan's private sector, but the growth in business activity in September, as a month earlier, proved insufficient to offset the decline in manufacturing," the expert explained.
According to her, cost inflation in services against the backdrop of weak effective demand increased pressure on business margins.
"As a result, the composite PMI continued to decline and remained below the neutral 50-point mark for a second consecutive month," Mukhambetaliyeva emphasized.
Optimism rose despite the slowdown
Despite the overall slowdown, entrepreneurs' optimism regarding prospects for the coming year persisted and rose to its highest levels in the past three months.
The composite PMI output index for Kazakhstan in September pointed to an intensified decline in business activity. The headline index fell from 49.3 to 48.9. The decline was again driven mainly by manufacturing. At the same time, further signs of a slowdown in business activity growth were also observed in the services sector.
The situation in August
In August of this year, growth in business activity in Kazakhstan's services sector also showed a substantial slowdown. At that time, the composite private business index fell below the critical mark due to a sharp decline in production volumes in manufacturing. The rates of inflation in resource costs and selling prices at the end of summer were the lowest in five and three months, respectively. A number of service providers chose to absorb part of the increased costs themselves, offering discounts to clients to stimulate sales.