Business conditions in Kazakhstan’s manufacturing sector continued to weaken in May, with firms reporting lower demand, declining output and further reductions in employment, according to the latest Freedom Holding and S&P Global Purchasing Managers’ Index (PMI) survey.

The Purchasing Managers' Index (PMI) stood at 49.0 in May, little changed from 48.9 in April. A reading below 50 indicates a contraction in business activity. The latest figure marks the fifth consecutive month of deterioration in operating conditions, although the decline remained modest.

Manufacturers reported a renewed fall in new orders after a brief recovery in April, according to the survey. Survey participants cited weaker customer demand and financing constraints as key factors weighing on sales.

Output also continued to decline during the month, though at a slower pace than in April. Employment levels fell for another month as companies adjusted staffing levels in response to subdued business activity.

Cost pressures remained elevated but showed signs of easing. Both input prices and output charges continued to increase in May, although the pace of inflation slowed compared with the previous month.

Saltanat Mukhambetaliyeva, economics research and analytics head at Freedom Holding Operations, said: "In May, Kazakhstan’s manufacturing industries sent a mixed signal — a gradual recovery in the indices of output and stocks of purchases following the March trough occurred alongside a sharp contraction in the operational buffer: indices of backlogs of work and finished goods inventories fell sharply, reaching seven-year lows. This may indicate a shift toward a more adaptive production model focused on short-term processes amid weakening demand and mounting logistical and financial constraints.

"Business expectations over the 12-month horizon recorded a notable monthly correction, yet remained in optimistic territory, pointing to potential recovery conditional on an inflow of new orders and further easing of cost pressures."