The PMA has released the results of its Business Cycle Index (PMABCI) for August 2015. Results showed that the overall PMABCI has slightly declined from 7.5 points during July to around 6.6 points this month, mainly due to the deterioration in economic activity in Gaza Strip (GS), and despite an improvement in the West Bank (WB). Also, results showed a much higher value than that registered in the corresponding month of 2014, i.e., during the Israeli war on GS, when the index plunged to -35.5 points.
In the WB, the index has slightly improved to around 13.2 points this month, compared with 12.0 points during July, supported by its progress in most industrial sub-sectors, particularly textiles (from 6.7 points to 7.3 points). Moreover, the leather, paper, chemicals and pharmaceutical, and engineering sub-sectors have all witnessed minor rises in the same period. On the other hand, the indices of wood, furniture and construction sub-sectors have all marginally declined in August.
The rise in the WB index reflected the expansion in production during August, in addition to the expectations of higher production during the coming three months. These optimistic expectations were supported by the "back to school" season, which has caused a significant upturn in the textiles sub-sector during August. It is also worthy to mention that a large number of expatriates usually arrive during summer, which stimulates demand, and thus higher production. Also, a positive outlook for the short horizon has prevailed, reflecting expectations of better production and employment levels in the coming months.
In GS, the situation looked quite different and an opposite trend emerged, as the index continued to deteriorate, reaching -15.3 points in August, compared with -9.3 points in the previous month. The Gazan industrial sub-sectors did not seem to benefit from the preparations for "back to school" season under the blockade. Hence, the majority of sub-sectors' indices have declined, particularly the food and textiles industries. The food index has dropped from -2.1 points to around -6.2 points, while the textiles index declined from 2.3 points to -2.3 points during the same period. Similarly, paper and plastic sub-sectors have also declined, while construction, chemical and pharmaceutical, and engineering sub-sectors have marginally improved.
Overall, the GS firms owners' pessimism about the near future has persisted during August as both expected production and employment have declined. Moreover, most industries continued to encounter numerous obstacles, including deficiencies in raw materials, shortages in electricity and fuel supplies, and prolonged delays in reconstruction efforts, in lifting the Israeli blockade, and in opening the Rafah border crossing.
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 maximum value of the PMABCI is positive 100 point, while the minimum is minus 100 point; a positive value indicates favorable economic performance, while a negative value indicates bad performance. 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.