Growth in Kazakhstan’s service sector weakened for a second consecutive month in September, according to the latest Freedom Holding Corp Kazakhstan Services Purchasing Managers' Index (PMI) survey published by S&P Global on October 5.

The Business Activity Index fell to 51.4 in September from 51.9 in August. A reading above 50 indicates growth, while a figure below 50 signals contraction. Despite the slowdown, activity has remained in positive territory every month since April.

The latest increase was linked partly to higher volumes of new business, although the pace of new-order growth also moderated. Companies surveyed reported that weaker demand at some firms, temporary suspensions of operations and the loss of clients constrained the overall expansion. 

The continued increase in activity nevertheless supported a marginal recovery in employment across the services sector. Business confidence regarding activity over the next 12 months also improved during the month.

At the same time, service providers continued to face significant increases in input costs. Companies remained reluctant to pass the higher costs on to customers, resulting in only a slight rise in charges. The increase in prices charged was the weakest recorded since December 2020.

Saltanat Mukhambetaliyeva, economics research and analytics head at Freedom Holding Operations, commented: "The service sector continues to act as the main stabiliser of Kazakhstan’s private sector. However, as in the previous month, the increase in business activity in September was insufficient to offset the downturn in manufacturing. As a result, the Composite PMI continued to fall and remained below the neutral 50.0 threshold for the second consecutive month.

"Cost inflation in services, against a backdrop of weak effective demand, intensified pressure on margins, particularly in consumer services. The latest available official data for January–August continue to show positive trends in trade and transport.

"At the same time, weakening momentum in the transport and storage segment indicated by the PMI results may be an early signal that will take time to be confirmed in official statistics. Business expectations for the year ahead improved somewhat, reducing the risk of a more pronounced slowdown, although profitability concerns and demand dynamics may constrain the sector’s expansion in the short term."