Kazakhstan's Manufacturing Sector Contracts as April PMI Slumps Below 50, Raising Concerns Over Economic Growth

The Kazakhstan manufacturing sector has entered contractionary territory for the first time in nearly a year, with the April Purchasing Managers’ Index (PMI) plummeting to 48.7—a sharp drop from March’s 52.7 and signaling significant economic headwinds. The decline, the steepest since March 2024, underscores a sudden reversal of momentum in a sector that had been a pillar of growth for the Central Asian economy.

A Sector in Crisis

The April PMI contraction is not merely a statistical blip but a multifaceted downturn driven by weakening demand, supply chain disruptions, and soaring costs. New orders fell for the third consecutive month, with the New Orders Index dropping to 47.2, reflecting both domestic and export market softness. Production levels collapsed further, hitting 44.0—the lowest since March 2024—as companies grappled with reduced demand and logistical bottlenecks.

Employment also declined, though at a slower pace, with the Employment Index edging up to 46.5% but remaining below 50. The data suggests firms are trimming staff to align with lower output requirements, a trend that could exacerbate social and economic pressures.

Supply Chains Under Siege

A central factor behind the downturn is the strain on supply chains. Supplier delivery times worsened to a 55.2 reading—the highest since late 2023—as port congestion, customs delays, and tariff-related disruptions intensified. Manufacturers cited “complex tariff calculations” and “border clearance backlogs” as critical challenges, with delivery delays contributing to a sharp rise in raw material inventories (50.8%).

Meanwhile, input costs surged to a 69.8% reading, driven by higher raw material, transportation, and utility expenses. While companies passed some costs to consumers, output price inflation eased slightly, highlighting the fragility of profit margins.

Exports and Imports in Freefall

The global economic slowdown has hit Kazakhstan’s export-driven manufacturers hard. New export orders plummeted to 43.1%, the lowest since September 2023, while imports contracted for the first time in months to 47.1%, signaling reduced reliance on foreign inputs. These declines suggest a broader loss of confidence in global trade, with tariffs and geopolitical tensions complicating trade flows.

A Turn from Optimism to Pessimism

The April data contrasts sharply with March’s 52.7 PMI, which had reflected optimism over rising demand and government investment. Business sentiment, though cautiously positive earlier in 2025, has now turned pessimistic. A full 41% of manufacturing GDP contracted compared to March, according to the report, with companies citing margin erosion and operational uncertainty.

Implications for Investors

The PMI decline raises red flags for investors in Kazakhstan’s manufacturing-heavy sectors, such as energy, metals, and machinery. While the sector’s contraction may pressure stocks like KazMunayGas (KMG) and Kazakhmys Mining, sectors less reliant on exports or raw material costs—such as consumer goods or technology—might offer safer havens.

Looking Ahead

The government faces a critical juncture. With inflationary pressures persisting and supply chains fractured, policymakers must address tariff complexities and invest in logistics infrastructure to stabilize trade. However, with global demand weak and domestic debt levels elevated, quick fixes are unlikely.

Conclusion

Kazakhstan’s manufacturing sector is at a crossroads. The April PMI contraction—driven by demand weakness, supply chain failures, and cost pressures—underscores vulnerabilities in an economy heavily reliant on global trade. With 41% of manufacturing GDP shrinking month-on-month and input costs at a 69.8% inflation rate, the path to recovery requires both domestic reforms and a favorable global environment. For investors, the data suggests caution in cyclical sectors while seeking opportunities in areas insulated from the current headwinds. The coming months will test whether Kazakhstan can reverse course—or if the contraction becomes entrenched.

As the Kazakh economy navigates these challenges, the stakes for policymakers and businesses alike have never been higher.