The PMA has released the results of PMA Business Cycle Indicator (PMABCI) for February 2014. The PMABCI is a monthly index which aims to capture the state and evolution of economic activity in Palestine by noting performance of the industrial sector, especially fluctuations in production and employment levels and implications for the economy at large. 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 February 2014, the PMABCI witnessed an improvement at the national level, by increasing from -3.34 in January to around 3.87. This improvement comes as a result of the increase in the West Bank (WB) indicator, in addition to a lower pace of deterioration in Gaza Strip's indicator. Also compared to the corresponding month of 2013, which scored -4.46, the PMABCI has improved (see the attached figure).
The WB indicator picked up from around -1.44 in January to around 8.25 in February, 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 index has increased from 3.83 to 5.65, while textile index has improved from -1.26 to 4.4, during the comparison period. Also, the indices of chemical and pharmaceutical, engineering, plastic and construction industries have witnessed slight improvements, while wood and leather indices witnessed a relative decline. It is also worth noticing that the WB February index has also improved compared to previous periods, achieving its highest level ever.
However, data also indicates higher optimism than before regarding the near future among industrial firms, which comes against the backdrop of continuous U.S efforts to stimulate the peace process between Palestinian and Israelis, and decreased fears concerning the possibility of more deterioration in the security conditions in the future.
In GS, the indicator has improved slightly from -22.94 to -18.92 during the comparison period, which is basically due to the improvement in the food sub-sector, which is considered the main industry in the strip. Food index has improved from -20.54 to around -13.69, followed by a lesser improvement in the furniture index. On the other hand, the performance of the remaining sub-sectors either did not change, or improved slightly.
In spite of this improvement in GS index, its value remains negative, reflecting continued bad conditions in the strip as a result of various factors, including political tensions in Egypt and their effect on the overall economic activity, and restrictions on movement and access of goods and individuals. Data indicates high pessimism about the future among industrial firms, as a result of the continuous deterioration in the economic and security conditions, which would significantly undermine the index value in the future.
It is important to note 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 is, the better the economy. 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.