In July, 2024 Kazakhstan’s manufacturing sector continued to expand, as confirmed by the S&P Global PMI index, which reached 51.7. This figure remains above the critical 50.0 mark for the fifth consecutive month, indicating ongoing growth despite a decrease from June’s index of 52.3. In the context of numerous economic challenges, this result warrants thorough analysis.
Growth in New Orders and Production Volumes
The growth in new orders in July taking place for six consecutive months is a positive signal. It reflects an improvement in demand in both domestic and international markets. However, the pace of production growth has slowed to the most sluggish rate since April, possibly indicating limiting factors such as logistical issues and supply chain instability.
Employment and Product Inventory
Employment in the sector continues to grow, albeit at a slower pace compared to the record growth seen in June. This indicates sustained employer confidence in future growth despite economic uncertainties. At the same time, the decline in finished goods inventories at the fastest rate since December indicates active use of current stocks to meet demand.
Inflation and Raw Material Costs
A serious challenge remains inflation, driven by the rising cost of raw materials and the weakening of the tenge. The increase in raw material prices exerts pressure on production costs, which could lead to higher final product prices and, consequently, a slowdown in demand. Companies need to find ways to optimize production processes and reduce costs to mitigate the impact of inflationary factors.
Logistical Issues and Sanctions
Logistical issues, exacerbated by sanctions against Russia, continue to extend delivery times. This factor creates uncertainty and risks for production plans. In this regard, more attention needs to be paid to developing domestic logistics infrastructure and diversifying supply sources.
Producer Optimism
Despite the challenges mentioned above, producers remain optimistic about future growth in new orders. However, the level of optimism has been declining for the fourth consecutive month reaching its lowest point in 2024. This may indicate weakening confidence in sustained growth and the need for a deeper analysis of external and internal factors affecting the sector.
Conclusion
Kazakhstan’s manufacturing sector demonstrates resilience in a complex economic environment. The maintenance of positive trends in new orders and employment indicates potential for further development. However, inflation, logistical issues, and declining levels of optimism require attention and timely measures to support sustainable growth. A comprehensive approach including cost optimization, logistics improvement, and supply diversification will enable Kazakhstani manufacturers to successfully overcome current challenges and continue their development.
Kuanysh Beisengazin
Economist
