The PMA has released the results of PMA Business Cycle Indicator (PMABCI) for January 2014. The PMABCI is a monthly index which aims to capture the status and evolution of the Palestinian business environment, reflecting fluctuations in production and economic activity overtime. The construction of the indicator is based on qualitative data obtained from monthly business surveys of a representative sample of industrial institutions’ owners/mangers on the value of various leading indicators during a specified period, and their expectations for the coming months. After that, the data is processed to construct a quantitative PMABCI.
During January 2014, the PMABCI witnessed an improvement from -8.31 in December 2013 to -3.34. This improvement comes as a result of the increase in the West Bank (WB) indicator, despite the contraction in Gaza Strip (GS) indicator, at the same period. Comparing to the corresponding month of 2013, the PMABCI, which scored -6.74 then, has improved slightly at the national level; it improved in the WB, while it diminished in GS (see the attached figure).
The WB indicator picked up from around -12.87 in December to -1.44, which comes basically from the improvement in food and textile sub-sectors that together account for more than one third of the WB labor force. Food industry index has increased from 0.0 to 3.83, while textile index has increased from -8.18 to -1.26. Also, engineering industry and paper sub-sector have witnessed a slight improvement. From the other side, construction and furniture subsector indexes declined from -0.39 to -2.66, and from 0.0 to -1.63, respectively.
It is worth noting that despite the improvement in the WB index it is still scoring a negative value, which indicates continuous overall bad conditions but a performance less worse this month compared to the previous month. However, data also indicates that industrial firms are less pessimistic this month comparing to the previous. But despite this relative optimism about the near future, the WB still faces uncertainty as to progress in the ongoing Palestinian-Israeli negotiations, and the possibility of deterioration in security conditions as a result of that.
In GS, the indicator has witnessed a huge contraction, from -4.41 to -22.94 during the comparison period. This contraction is basically due to the decline in food sub-sector which is considered to be the main industry in the strip. Food index has contracted from -3.42 to around -20.54, followed by lesser contractions in furniture, textile, and plastic sub-sectors. On the other hand, the performance of the remaining sub-sectors either did not change, or improved slightly.
In general, such contraction occured due to the overwhelming electricity crisis, where Gaza power plant has stopped working many times during the month due to lack of fuel. Many reasons stand behind this shortage, including the cutting of imported fuel from Egypt under the continued political unrest in Egypt. The electricity crisis has critically influenced all life aspects in GS, especially the social and economic aspects. Beside this, GS still suffers from the Israeli siege and the political schism. On the other side, data indicates a high pessimism about the future among industrial firms, as a result of the continuous deterioration in the economic and security conditions which, significantly depresses the index value in the future.
It is important to notice that the maximum value of this indicator is positive 100, while the minimum is minus 100; a positive value indicates favorable economic performance, and the bigger this value, the better the economy is. But if the value is negative, then economic performance is worsening the closer it gets to minus 100. On the other hand, a value close to zero indicates that economic performance did not change and is unlikely to do so in the near future.
Source: PMA (2014). PMABCI, January, 2014.