BAKU, Azerbaijan, November 2. Kazakhstan's
manufacturing sector showed signs of stabilization in October as
the pace of decline slowed to its weakest level since the downturn
began in January, according to the Freedom Holding Corp. Kazakhstan
Manufacturing Purchasing Managers' Index (PMI), compiled by S&P
Global.
"There were tentative signs of recovery in the Kazakhstan
manufacturing sector during October as business conditions
deteriorated to a much lesser degree than in September," the report
said.
The PMI rose to 49.4 in October from 46.4 in September, although
it remained below the 50.0 mark separating growth from contraction.
The reading indicated a slight deterioration in the sector's
conditions, the mildest since the current 10-month sequence of
decline began in January.
According to the report, new orders neared stabilization at the
start of the fourth quarter, falling only marginally and at the
slowest pace in six months. Survey respondents reported lower
volumes of customer requests but also some tentative signs of
improving demand. Manufacturing output also decreased at a much
slower pace than in September.
Firms continued to reduce output in response to lower new
orders, although some respondents said upgraded machinery had
helped limit the latest contraction. Employment also showed signs
of improvement, declining only fractionally. While some companies
continued to cut staff, others filled previously vacant
positions.
Despite these improvements, spare capacity remained evident in
the sector, with outstanding business and stocks of finished goods
falling markedly. In both cases, however, the pace of decline was
the slowest in six months.
Business confidence remained subdued as challenging economic
conditions made the outlook for the coming year uncertain.
Confidence in production over the next 12 months fell from
September and remained among the lowest levels since the COVID-19
pandemic. Companies that remained optimistic linked their outlook
to expectations that new orders would return to growth.
Manufacturers reduced purchasing activity for the fifth
consecutive month in October. Purchased inputs were often used
directly in production, contributing to the continued decline in
raw material stocks. Supplier delivery times lengthened to the
greatest extent in two years, with companies reporting customs
delays at the borders with mainland China and Russia.
Cost pressures also remained significant. Input prices rose
markedly, with the rate of inflation in line with the average
recorded in the third quarter. Some companies reported higher
prices for energy and oil-related products. Higher costs for energy
and raw materials led manufacturers to raise their selling prices.
The rate of selling price inflation accelerated from September but
remained relatively moderate.
Saltanat Mukhambetaliyeva, Economics Research and Analytics Head
at Freedom Holding Operations LLP, said October's results offered
grounds for cautious optimism, primarily due to the easing downturn
among larger producers.
"However, improving sentiment in some segments is still running
ahead of a recovery in demand. In chemicals and basic metals,
rising expectations for the year ahead coincide with declining
orders, while shrinking raw material stocks leave production more
vulnerable to delays in deliveries of raw materials and
components," she said.
Mukhambetaliyeva added that competition from imported finished
goods amid a strong tenge could pose an additional constraint for
the food and beverage sector. She noted that future performance
would depend not only on an increase in new orders but also on
manufacturers' ability to maintain profit margins amid adverse
domestic and external conditions.
The Freedom Holding Corp. Kazakhstan Manufacturing PMI is
compiled by S&P Global from responses to questionnaires sent to
purchasing managers in a panel of around 250 manufacturers.
The PMI is a weighted average of five indices: New Orders (30%),
Output (25%), Employment (20%), Suppliers' Delivery Times (15%),
and Stocks of Purchases (10%). For the PMI calculation, the
Suppliers' Delivery Times Index is inverted so that it moves in a
comparable direction to the other indices.
