The Monthly PMA Business Cycle Index (PMABCI) – December 2015

Slight improvement in the value of the index

The PMA has released the results of its Business Cycle Index (PMABCI) for December 2015. These results showed that the index improved slightly after two consecutive months of decline (October and November), due to its recovery in the West Bank (WB), and despite its decline in the Gaza Strip (GS). Thus the overall index improved to around -16.0 points this month, compared to around -16.8 points during last November. Whereas compared with December 2014, the index showed a notable decline, to around -0.3 point.

In the WB, the index increased from -20.3 points in November to around -16.0 points in December, led by the textiles sub-sector index, which increased from -11.2 points to around -5.0 points, and the furniture sub-sector, which increased slightly from -4.4 points to -4.0. On the other hand, the food sub-sector index declined from 0.7 points to around -2.0 points, while other sub-sectors’ indices witnessed relatively stable values during the same period.

Despite the recent political and security turmoil in the WB that started early last October, the situation has not deteriorated seriously so far. This served to alleviate the public's concern about the the economy's outlook, and tempered industrial establishments owners' pessimism about the near future business prospects. Thus overall expectations were for an improvement in the output and employment levels in the coming period, affected by increased seasonal demand for winter-related clothing and other products.

In GS, the index witnessed a further drop during December to about -15.8 point, compared with -13.0 point in November. This decline reflected the deterioration in both: the textile and clothing sub-sector (unlike the WB) index which dropped by more than 4 points; and the engineering sub-sector index which dipped by about a point (from 0 to -1.0), during the same period. On the other hand, the non-metallic sub-sector (which includes construction industries) index increased from -6.8 to -4.2, while other sub-sectors’ indices remained relatively stable during the same period.
It is noteworthy that except for June 2015, Gaza's index remained in the negative zone for two consecutive years, which reflected the continuously weak and deteriorating political and economic conditions in the Strip. Several negative factors contributed, including deficiencies in raw materials; shortages in electricity and fuel supplies; and prolonged delays in all of reconstruction efforts, lifting the Israeli blockade, and opening the Rafah border crossing. Consequently, pessimism about the near future has notably increased, as indicated by industrial firms owners' expectations for a weakening production and sagging employment in coming months. 

It is worth to note 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.