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

Improvement in Gaza Strip and decline in the West Bank

The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for June 2019. The results showed that the overall index has slightly declined against the backdrop of conflicting trends between the West Bank and Gaza Strip, maintaining a negative value for the third month in a row in light of current budget crisis, which led to only a partial disbursement of the public employees’ salaries. Accordingly, the overall index fell to around -6.7 points in June compared to -6.1 points in the previous month, but with much lower than its corresponding level of the last year (-0.5 points).

In the WB, the index fell from about 3.1 points in last May to approach near zero (less than 1.0 point) this June. On the sectoral level, the indices of the industry, the trade and the agriculture witnessed noticeable changes, while the remaining activities registered stabilized performance. The industrial index seemed to be the only exception this month by improving from 2.3 to 4.8 points, while the trade index sharply declined (from 2.9 to -1.4 points) and the agriculture index fell (from -1.8 to -2.2 points). At the same time, the construction index remained close to -0.4 points, the transport and storage index stabilized at 0.2 points, while both the renewable energy and IT indices maintained 0.0 level.

In general, the surveyed firm owners indicated a decline in sales during the previous period, which in turn resulted in lesser withdrawal of 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 continued its slow progress for the third consecutive month, achieving its best value in about 28 months (-24.9 points), compared to -27.7 points last month. Unlike the West Bank, the decline in the industrial index proved to be the only negative performance during June, where it fell from -4.5 to about -5.7 points. However, the remaining indices have improved albeit at varying degrees. This progress headed by the agriculture index (-2.5 to -0.1 points), and followed by the construction index (from -1.8 to -0.5 points) and the trade index (from-18.4 to -17.8 points). Meanwhile, the indices of transport and storage, IT and renewable energy have all slightly rose, and close to zero.

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 the last two months, 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.