Kazakhstan’s manufacturing sector remained in contraction in September, with output, new orders, employment and purchasing activity all declining as companies continued to face weak demand and supply-chain problems, according to the Freedom Holding Kazakhstan Manufacturing Purchasing Managers' Index (PMI) survey for the month published by S&P Global on October 1.

The Freedom Holding Kazakhstan Manufacturing PMI stood at 46.4 in September, up marginally from 46.0 in August but remaining below the 50.0 threshold separating growth from contraction. The latest reading extended the sector’s downturn to nine consecutive months.

New business recorded its sharpest decline since March 2022 as manufacturers reported difficulties securing orders amid weaker demand. Some companies also said machinery problems had forced production stoppages, preventing them from accepting additional orders during September, according to the accompanying statement to the survey.

The deterioration in new business contributed to further reductions in output and purchasing activity, while employment also declined. Manufacturers continued to report disruptions across their supply chains, adding to operational pressures during the month.

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Input costs rose sharply in September, although the rate of inflation eased compared with August. Companies therefore continued to contend with higher production expenses even as weaker demand limited their ability to secure new business.

Despite the continued deterioration in operating conditions, manufacturers became more optimistic about the months ahead. Business confidence improved during September, with companies expressing expectations that new orders could begin to recover.

Saltanat Mukhambetaliyeva, economics research and analytics head, Freedom Holding Operations, said: "September results indicate that pressure on Kazakhstan’s manufacturing industries persisted. Against a backdrop of generally stable conditions in global metals and chemical product markets, this performance points to the significant role of local factors and the continued dependence of some manufacturers on imported raw materials.

"Weak domestic demand remains a constraint, with its effects most evident in the food and drink sector. Among firms of different sizes, the contraction in business activity accelerated at large manufacturers, while medium-sized enterprises were in a somewhat better position. The continued decline in employment amid expanding production capacity indicates that the investment impulse has yet to translate into growth in new orders and employment.

"Nevertheless, market participants became somewhat more optimistic about the next 12 months, providing grounds to expect gradual stabilisation in the sector."