The Monthly PMA Business Cycle Index (PMABCI) – April 2015
A continued improvement in the index
The PMA has released the results of its Business Cycle Index (PMABCI) for April 2015. The results showed that the overall PMABCI has continued to improve for the second consecutive month, by increasing to around 16.3 points compared with 12.2 points and -0.6 points in the previous and corresponding months, respectively.
This improvement reflected a remarkable increase in the West Bank's index, which jumped from 16.2 points during March, to around 23.2 points this month, due to improving performance in all sub-sectors, with the exception of slight declines in the leather and traditional sub-sectors. The main engine for this rise is the food sub-sector, which holds a substantial weight in the industrial sector in terms of output and employment, where its index has improved to 5.7 points, compared to 4.1 points in March.
The West Bank economy showed a better performance this month compared to the beginning of 2015, supported by higher production levels. This improvement garnered optimism among industrial firms for a rising demand and production in the coming months, especially as Israel's seizure of Palestinian clearance revenues came to an end. It is worth noting that 60% of March public servants' payroll has been paid earlier this month, likely enabled by the recently transferred Saudi grants for budget support for the first three months of 2015.
In Gaza Strip, however, the index has witnessed further deterioration to reach its lowest levels in six months, dropping to -24.0 points compared to -14.2 points in March. The composing sub-sectors either decreased or remained stable during the specified period. Also the considerable drop in the food sub-sector (from 2.1 points to -6.2 points) has weakened the overall index substantially.
In the meantime, Gazan industries continue to suffer from numerous obstacles, including the shortage in raw materials with significant increases in their prices, forcing many firms, such as for leather and in the construction sub-sector, to downsize or completely halt operations, In addition, Israel continued to prevent the entry of some additional commodities such as woods, some iron cylinders, and chemicals, which caused the deterioration of some industrial activities. Moreover, the continued electricity and fuel crises, the prolonged delay in embarking on reconstruction, lifting the blockade, and opening Rafah border crossing. This is in addition to a decline in domestic demand due to the fact that public servants received only 60% of their salaries, and some other institutions, such as universities paid only half salary due to the financial crisis they suffer from. Accordingly, expectations about output and employment declined this month, accompanied by heightened pessimism among firms' owners about the near future.
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.