The extended PMA Business Cycle Index (extended PMABCI) – May 2019

Improvement in the West Bank and Gaza Strip

The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for May 2019. The results showed that the overall index has improved due to a similar performance in both the West Bank and Gaza Strip; however, it remained within the negative zone in light of current government's budget crisis, which led to only a partial disbursement of the public employees’ salaries. Accordingly, the overall index rose to around -6.1 points in May compared to -14.1 points in the previous month, but to much lower than its corresponding level of the last year (4.6 points).

In the WB, the index managed to escape the negative zone that trapped in last month for the first time in around 3 years, jumping to around 3.1 points compared to -7.4 points in the previous April. This comes as most sectors’ indices increased, headed by the main rise in the trade index (from -4.0 to 2.9 points); followed by the growth in the indices of industry (from -0.3 to 2.3 points); storage and transportation (from -0.9 to 0.2 points); and agriculture (from -2.2 to 2.3 points).  At the same time, both indices of renewable energy and IT have relatively stabilized at 0.0 and -0.1 points, respectively, while the construction index fell from 0.2 to -0.5 points.

In general, the surveyed firm owners indicated a progress in production and sales during the previous period, which in turn resulted in declining inventory .In spite of their cautious optimism about future production, their expectations on employment in the coming three months, remained very negative.

Meanwhile, Gazan index succeed to reverse its previous performance, registering the highest value in a round a year at -27.7 points compared to -29.9 points in last April. This increase is due to rises in most sectors, particularly the industry whose index grew from -6.0 to -4.5 points; followed by increases in the indices of storage and transport (from -0.9 to -0.2 points); and construction (from -2.2 to -1.8 points). Meanwhile, rises in indices of renewable energy and IT were slight, from -0.2 to 0.0 points for the former and from -0.3 to -0.2 points for the latter. In the other direction, the agriculture index declined slightly from -2.0 to around -2.5 points during the comparison period.

It is worth noting that the Gazan index has always registered negative values since the PMA started calculating the extended indices (since January 2017), which reflect the adverse long-lasting political and economic conditions in the Strip. However, firms’ owners indicated relatively better production and sales during this month, however, they maintained their negative outlook about the near future.

It is noteworthy that 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.