The Monthly PMA Business Cycle Index (PMABCI) – August 2017

The overall index declined

The PMA has released the results of its Business Cycle Index (PMABCI) for 2017. The results revealed a notable deterioration in Gaza Strip's index, concurrent with a relative steadiness in the West Bank's index. This led Palestine's overall index to fall to the negative zone, registering -4.3 points in August compared to 0.3 points in last July. However, the index remained below the corresponding month in 2016, when it scored 4.6 points.

In the WB, most industrial sub-sectors' indices slightly declined, leading to a negligible drop in the WB's index from 14.5 points to 14.2 points. The food index fell (from 3.2 points to 2.6 points) and the furniture index decreased (from 6.0 points to 3.8 points), in addition to other minor falls in sub-sectors' indices of: leather, paper, plastic and engineering industries. Nonetheless, the textile index grew (from 0.0 points to 4.4 points) along with lesser increases in indices of the traditional industries, and the chemical and pharmaceutical industries. The construction industries index maintained its previous level.

Anyway, the steadiness in the WB's index resulted from conflicting trends: (i) improvements in August's production and sales; and (ii) a moderate drop in future expectations of production and employment levels, as industrial firms' owners indicated. 

However in GS, the highly volatile index experienced a sharp drop after a relative stability for three consecutive months, sliding to its lowest since the Israeli war against the Strip in mid-summer 2014. As a result, it fell to -50.6 points compared to -36.4 points in last July. This resulted from declines in the indices of furniture (from -6.1 points to -13.3 points), construction industries (from -9.9 points to -12.7 points), and to lesser drops in the subsector's indices of plastic, chemical and pharmaceutical industries, and engineering industries. At the same time, the remaining sectors maintained their previous level.

This severe reduction came against the backdrop of (i) the weak performance (less production and sales, and accumulated inventories); and (ii) the lowest future expectations in around three years, as the firms' owners indicated. The Gazan index remained stuck in the negative zone for around four years, which reflected the adverse political and economic conditions in the Strip; the continued Israeli siege; near-complete closure of the Rafah border crossing; and prolonged delays in reconstruction efforts. 

It is noteworthy 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.