The Monthly PMA Business Cycle Index (PMABCI) – April2016

Slight decline in the Index due to a notable drop in Gaza

The PMA has released the results of its Business Cycle Index (PMABCI) for April 2016. The results showed that despite the improvement in the West Bank (WB) index, the notable decline in the Gaza Strip (GS) index has pushed down Palestine's overall PMABCI. Thus, the overall index decreased to around 4.1 points this month, compared to 5.4 points during last March, and around 16.3 points in April 2015.

In the WB, the index rose to 15.4 points in April, compared to 11.0 points last month, supported by the improvement in the industrial sub-sectors' indices of food (from 4.7 points to 5.8 points), furniture (from 2.8 points to 4.8 points), engineering (from -1.5 points to 0.2 points), and paper (from 0.7 points to 0.9 points). However, the remaining sub-sectors' indices remained either stable or declined marginally. Moreover, industrial firms' owners continue to show higher optimism regarding expected employment in the near future, despite relatively stable expectations for levels of production.

In contrast, the highly volatile Gazan index witnessed a sharp drop to -22.1 points, compared to -10.7 points in March. This drop resulted from a noticeable decline in the indices of most sub-sectors, specifically food (from 2.1 points to -9.3 points). In addition, the textile, paper, chemicals, plastic and furniture subsectors' indices have all declined in varying degrees, while those for construction and engineering sub-sectors slightly improved.

The decline in the Gazan index resulted from a drop in production and demand, and a rise in the accumulated inventory. Those developments reflected a weakening outlook among industrial firms' owners, whose pessimism about the near future has increased again, resulting in negative forecasts for future production and employment.

It is worth mentioning that Gaza's index remained in the negative range for more than two consecutive years, which reflected the dire and worsening political and economic conditions in the Strip, as the culprit factors persisted. Thus supplies of raw materials, electricity and fuel remained deficient; and prolonged delays in reconstruction efforts, lifting the Israeli blockade, and opening the Rafah border crossing continued.

It is also noteworthy 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
 

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