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UPDATE 1-South Africa's Absa PMI extends recovery in October

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JOHANNESBURG, Nov 2 (Reuters) - South Africa’s seasonally-adjusted Absa Purchasing Managers’ Index (PMI) recovered further in October, as some respondents suggested demand was approaching pre-COVID lockdown levels and businesses upped their inventories, a survey showed on Monday.

The index, a gauge of manufacturing activity in Africa’s most industrialised economy, rose to 60.9 points in October from a revised 58.5 points in September, remaining above the 50-point mark that separates expansion from contraction.

“The further increase at the start of the fourth quarter is an encouraging sign the manufacturing sector continues to recover following a record contraction in April,” Absa said in a statement.

South Africa imposed a strict coronavirus lockdown at the end of March, squeezing businesses and consumers, and economic output recorded its largest contraction ever in the second quarter. The government has since eased restrictions to their lowest alert level.

“Some respondent comments suggest that demand and capacity are nearing normal (pre-COVID) levels,” Absa said.

The index measuring inventory levels rose to its highest level in about 13 years. The new sales and business activity indices slipped but remained in expansionary territory. Respondents did, however, voice concerns about a COVID-19 resurgence in Europe.

While the rate of coronavirus infections has eased locally, a surge in European countries as the northern hemisphere enters winter has prompted new lockdowns there, which could lead to a disruption of exports and lower overseas business for local firms. (Reporting by Mfuneko Toyana Editing by Alexander Winning and Giles Elgood)