Kazakhstan's manufacturing industry fell deeper into contraction in July, according to the latest Freedom Holding Kazakhstan Manufacturing Purchasing Managers' Index (PMI) survey published by S&P Global on August 3.

The decline in new orders was the sharpest in more than two-and-a-half years. Companies responded by scaling back production solidly and lowering their employment and purchasing activity, the data showed. Manufacturers were also much less optimistic about the future prospects for output given the current challenging economic conditions, readings on sentiment indicated.

The PMI declined to 47 in July from 48.5 in June. Any reading below 50 indicates a deterioration in operating conditions. The latest reading extended the sector's contraction seen throughout 2026.

Operating conditions for Kazakh manufacturers have worsened on a monthly basis throughout 2026 so far. July’s solid reduction in new orders was the worst seen since November 2023. Manufacturers often reported that customers were unable to secure the necessary financing to be able to commit to new projects.

Saltanat Mukhambetaliyeva, economics research and analytics head at Freedom Holding Operations, commented: "July intensified the downturn in Kazakhstan’s manufacturing. The most notable monthly deterioration was observed in the food & drink industry, where new orders declined the most, despite continued growth in retail trade turnover according to official statistics.

“This suggests that the increase in turnover is being driven mainly by higher prices rather than by growth in physical sales volumes. Against this backdrop, the decline in new orders likely reflects constraints on working capital financing amid tighter bank lending conditions.”

She added: “Business expectations for the year ahead fell to a more than six-year low, which we also associate with the backlogs of work index, remaining at historically weak levels for three consecutive months (firms are completing previously received orders faster than new ones are coming in).

“This leaves the sector more vulnerable to further demand weakness and does not rule out challenging conditions persisting in the coming months. Continued moderate easing of the National Bank’s monetary policy could provide some support for the sector. However, the impact of lower policy rates will not be immediate — monetary policy transmission typically occurs with a lag and depends on market conditions. As a result, businesses are likely to see a meaningful improvement in financing conditions only over the medium term."