The PMA has released the results of PMA Business Cycle Indicator (PMABCI) for March 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 March 2014, the PMABCI witnessed an improvement at the national level, increasing from 3.87 in February to around 8.55 this month. This improvement comes as a result of the increase in the West Bank (WB) indicator, despite the deterioration in Gaza Strip's indicator. Also compared to the corresponding month of 2013, the PMABCI, which scored -0.05 then, has improved significantly (see the attached figure). It is also worth noting that the index has recorded the highest level ever.
The WB indicator has picked up from around 8.25 in February to around 15.98 in March, which comes despite the reduction in food and textile sub-sectors that together account for more than one third of the WB labor force. While on the other hand, other industries have shown significant improvements. Furniture sub-sector index has increased from -1.63 to 6.1, and engineering and precious metals sub-sector has improved from 0.88 to 3.08 during the comparison period. Also, leather, construction, and chemical and pharmaceutical subsectors have witnessed slight improvements.
However, data also indicates more optimism about the near future among the industrial firms, since the beginning of this year, which comes as a result of continuous U.S efforts to stimulate peace negotiations 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 dropped again from -18.92 to -22.59 during the comparison period, which is basically due to the decline in food sub-sector, which is considered the main industry in the strip. Food index has declined notably from -13.69 to around -20.54, followed by a lesser reduction in engineering sub-sector sector. On the other hand, the performance of other sub-sectors has witnessed relative improvements.
It is worth to notice that GS index went down deeply in the negative values since the beginning of this year, reflecting the continuous deterioration in economic, political and security conditions in the strip, mainly because of the political tensions with Egyptian side, and its effects on overall economic activity, specially through restricting the movement of goods and individuals. On the other hand, data still indicates a high pessimism about the future among the industrial firms, as a result of further deterioration in the economic and security conditions, which would significantly undermine 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.