The PMA has released the results of its Business Cycle Index (PMABCI) for January 2015. The results showed that the overall PMABCI witnessed a relative improvement from -0.3 points in December to around 3.9 points in January, due to the increase in manufacturing orders (demand) in both the West Bank (WB) and the Gaza Strip (GS). Similarly, the index also indicates improvement compared with the corresponding month of 2014, when it reached -3.3 points.
In the WB, the business cycle index has went up from around -1.9 points in December to around 4.5 this month due to improvements in textile and food sub-sectors, which account together for more than one third of the total employment in industry. The textile sub-sector index has increased to around 6.3 points compared to 1.3 points, whereas the food sub-sector has increased to 3.1 points compared to 2.0 points, during the comparison period. This increase in both sub-sectors may be attributed to some seasonal factors, such as the preparations for winter weather in terms of clothing and food, and hence an increase in aggregate demand. However, data revealed also an increased in other sub-sectors, with the exception of a slight decline in furniture, paper and engineering sub-sectors. This improvement was due to a rise in both current demand levels and expected production, accompanied with cautious optimism regarding the near future.
In GS, the index has recovered from –6.0 points during December, to around -3.0 points this month, as a result of improvements in most sub-sectors. Despite the decline in construction for the second consecutive month as a result of Israel barring the entry of needed building materials in sufficient amounts, improvements in other sub-sectors managed to compensate. The highest increase was in the food industry, which employs around one third of Gazan workers, where its index continued to recover from 2.3 points in December to around 6.9 this month; this recovery could be also ascribed to some seasonal factors related to the winter weather. However, pessimism about the near future has expectedly increased again in GS as a result of the delay in fulfilling commitments towards reconstructing Gaza, lifting the blockade, and opening Rafah Crossing border.
It is worth to note that the PMABCI is a monthly index, which aims to capture the state and evolution of economic activity in Palestine by tracking the performance of the industrial sector, especially fluctuations in production and employment levels and their 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 as to the value of various leading indicators during a specified period, and their expectations for the coming months. Afterwards, the data is processed to construct a quantitative PMABCI.
It is also important to note that the maximum value of the PMABCI is positive 100 point, while the minimum is minus 100 point; a positive value indicates favorable economic performance, and the bigger this value is, the better the economy. Similarly, a negative value indicates that economic performance worsens the closer this value approaches 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.