The PMA Monthly Business Cycle Index (PMABCI) – November 2014

An improvement in the index

The PMA has released the results of its Business Cycle Index (PMABCI) for November 2014. The PMABCI is a monthly index which aims to capture the status 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 construction of the indicator is based on qualitative data obtained from monthly business surveys of a representative sample of industrial institutions’ owners/mangers as to the value of various leading indicators during a specified period, and their expectations for the coming months. Following that, the data is processed to construct a quantitative PMABCI.

During November, the overall PMABCI witnessed an improvement, increasing from    -13.1 points in October to around -3.6 points this month as a result of the increase in the West Bank's industrial production. Yet, compared with the corresponding month of 2013 when it was 1.44 points, the index shows a decline.

In the West Bank (WB), the business cycle index has jumped from -15.8 points in October to around -2.8 points this month, due to improvement in textile and food sectors, which account together more than one third of total employment in the WB. Besides, all other sectors witnessed improvements with the exception of a slight decline in construction. This improvement came as a result of the rise in current and expected production, and indicated optimism about the future production and employment.

However in Gaza Strip (GS), the index declined again to around -15.5 points this month compared to -1.8 points in the previous month, as a result of the decline in demand and the subsequent accumulation in inventories. The highest decrease was in the food industry, which employs around one third of Gazan workers, where its index declined from -6.8 points in October to around -13.7 this month. On the other hand, construction has relatively improved given the dire need for reconstructing the buildings and institutions demolished during the recent Israeli assault on Gaza.

Pessimism about near future has expectedly increased again in GS, as a result of the delay in fulfilling the international community's promises regarding reconstructing Gaza, lifting blockade, and opening Rafah border crossing. This delay has raised fears among Gazans of a repeat of the 2008 war scenario, when the reconstruction process remained stalled for several years as a result of Israel's refusal to allow the entry of needed building materials.

It is important to note that the maximum value of the PMABCI is positive 100 point, while the minimum is minus 100 point; a positive value indicates favorable economic performance, and the bigger this value is, the better the economy. Similarly, a negative value indicates that economic performance worsens the closer this value approaches minus 100. 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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Source: PMA (2014). PMABCI, November, 2014.