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Highlights:
- The UK services sector saw a steep decline in October due to factors ranging from supply chain issues to recession fears.
- The PMI fell to 48.8 in October from 50.0 in September, indicating the sector contracted during the period.
The UK economy has been going through uncertainty. Financial markets have calmed a little now, but the situation was different last month when Liz Truss was the prime minister, and Kwasi Kwarteng was the chancellor. Especially after Kwarteng's disastrous mini-budget, the pound sterling fell to record lows against the US dollar, and calls for Truss' resignation grew stronger. This political and economic uncertainty hit the demand in October, leading to the steepest drop in business activity in the UK services sector since early 2021.
The latest data from the S&P Global UK Services Purchasing Managers' Index (PMI) shows that output in the sector fell at the sharpest pace since January 2021. The major factors behind the fall were interest rate hike fears, supply chain issues, recession concerns, squeezed household supplies, and delayed business investing.
Image Source: © Baramee | Megapixl.com
The PMI fell to 48.8 in October from 50.0 in September. While it is higher than the forecast of 47.2, anything below 50 shows contraction, while a number above 50 indicates growth.
The UK's services sector saw high input cost rises due to soaring energy bills and higher salaries. The weakening pound against the dollar further aggravated the situation.
It is also important to note that the country's services sector is bigger than the manufacturing sector, so policymakers keep an eye on such numbers as it accounts for the largest chunk of economic output.
Amid the latest PMI numbers for the services sector, Kalkine Media® explores some of the LST-listed stocks.
RPS Group plc (LON:RPS)
The group provides professional services with operations across the globe. Its market cap stands at 613.30, with a turnover (on book) of £211,368.73 at present. The stock has given a return of 75.44% to investors over the past year, while on a year-to-date (YTD) basis, the return has touched 77.71%. At the time of writing (8:52 AMGMT+1 on Friday), the company's shares traded at GBX 220.00, 0.45% down.
Mediclinic International plc (LON: MDC)
The leading healthcare services provider belongs to the FTSE 250. With a turnover (on book) of £870,401.03 and an EPS of 0.09, the company has given a return of 45.26% to shareholders in the past 12 months. On a YTD basis, the MDC's share price has soared by 55.06%. As of 9:02 AM, GMT+1 on Friday, the company's shares traded at GBX 496.80, marginally up by 0.04%.
Airtel Africa plc (LON: AAF)
The telecom services provider Airtel Africa enjoys a market cap of £4,438.38 million. The group has a turnover (on book) of £381,949.30 at present. The AAF's shares have given a return of 9.35% over the past year, while the YTD return is in the negative territory at -10.04%. Shares of the company were trading at GBX 120.20, up 1.78% as of 9:11 AM GMT+1 on Friday.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
