The extended PMA Business Cycle Index (extended PMABCI) – April 2018

Improvement in the West Bank and drop in Gaza

The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for April 2018. The new index surveys, beside the industrial sector, six additional sectors, namely: agriculture, trade, construction, transport and storage, IT and renewable energy. The overall index increased slightly during April, supported by the moderate improvement in the West Bank’s index and despite the deterioration in the Gazan index. As such, the overall extended PMABCI picked up marginally to -0.5 compared to -0.6 points in March and -11.8 points in April 2017.

In the WB, the index rose to 12.7 points this month compared to 10.7 points in March, owing to increases in most economic sectors' indices. The growth of the industry index (from 2.3 to 4.1 points) proved to be the engine of this improvement. Moreover, the WB’s indices registered slight increases in the transport and storage sector (from -0.4 to 0.9 points), the agriculture sector (from 4.0 to 4.9 points), the construction sector (from 0.2 to 0.3 points), the communication and IT sector (from 0.1 to 0.2 points) and the renewable energy sector (from 0.0 to 0.1 points). Conversely, the trade sector index slipped from 4.6 points to 2.2 points during the above-mentioned period.

Overall, the growth in the West Bank's index reflected higher production during April, and occurred despite the worse future expectations about production and employment, as indicated by the economic firms' owners. 

Conversely, the index in GS resumed deterioration, falling from -27.5 points in March to around -31.7 points in April due to declines in most sectors' indices, albeit at varying degrees. This fall was headed by the drop in the trade index (from -18.4 to -21.3 points) and agriculture index (from -2.0 to -3.9 points). It was followed by lesser decreases in the indices of the construction sector (from -1.2 to -1.3 points), the renewable energy sector (from 0.0 to -0.1 points) and the communication and IT sector (from -0.1 to -0.2 points). Conversely, indices of the industry and the transport and storage sectors have picked up slightly from -4.9 to -4.5 points for the former, and from -0.9 to -0.5 points to the latter.

It is worth noting that the Gazan index register mostly negative values, which reflects the adverse long-lasting political and economic conditions in the Strip, the continued Israeli siege, and the prolonged delays in reconstruction efforts. Moreover, production and sales levels declined during this month, which resulted in accumulated inventory, along with lower optimistic future expectations about production and employment in the coming three months, as indicated by Gazan firms' owners. 

It is noteworthy that the PMA has extended its business cycle index to increase its scope and coverage of the economy. The new index’s sectors form collectively around 60% of GDP (at factor cost) in Palestine, compared to only 15% under the previous industry-based index. The extended index still excludes the services and the financial and insurance activities, whose inclusion remains a challenge due to various measurement difficulties. In sum, the extended PMABCI is a monthly index, which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production and employment levels). The maximum value of the index is positive 100 points, while the minimum is minus 100 points; 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.