The Monthly PMA Business Cycle Index (PMABCI) – February 2017
Another decline in the indices of the West Bank and Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for February 2017. The results revealed a new drop in Palestine's overall index, due to the decline in the indices of both the West Bank (WB) and Gaza Strip (GS). As a result, the overall index slipped to around -12.3 points during this February, compared to -6.1 points in last January, and 1.0 point in the corresponding month in 2016.
In the WB, the index remained in the negative zone for the second consecutive month, declining to -5.1 points compared to -0.4 point in the previous month due to the drop in some industrial activities. The main engine was the fall in the construction industries index, which fell from 0.5 points to -1.5 points amid a stagnation in construction activities, followed by a decline in the furniture index (from -1.3 points to -4.7 points). Moreover, the indices of the leather and traditional industries have declined, albeit at a lesser degree. On the other hand, increases were slight for the indices of; food (from 2.5 points to 3.1 points), plastic (from -0.1 points to 0.3 points) and engineering industries (from -0.8 points to -0.7 points).
During February, electricity prices rose in the WB by around 5% following its rise by the Israeli company, which seemed to take a toll on the industrial activities. Furthermore, the industrial firms' owners predicted a lower production and sales this month compared to the previous month and the earlier expected levels. Nevertheless, their expectations about near future are still relatively high, showing more confidence regarding production and employment levels in the three coming months.
Likewise, the highly volatile index in GS has continued to deteriorated, falling again from -21.2 points last January to its lowest level since the Israeli attack in mid-summer 2014 (reaching -35.1 points this month). This slip came as a result of significant declines in the indices of main industrial sub-sectors, most notably, food (from 1.7 points to -2.6 points), textile (from -2.6 points to -5.8 points) and construction industries (from -4.4 points to -8.8 points). Nonetheless, the increases in the other indices were trivial; plastic (from -1.0 point to -0.3 points), chemical and pharmaceutical (from -1.0 point to -0.6 points) and furniture (from -8.3 points to -7.7 points).
Gazan industrial firms indicated a decline in sales during February, which resulted in accumulated inventories. In addition, pessimism exacerbated among firms' owners, particularly regarding employment in the near future. It is worth mentioning that the Gazan index remained stuck in the negative area for more than three consecutive years (except for June 2015) due to the severe obstacles that continued to suppress economic activity, particularly in the industrial sector. Those obstacles include the continued Israeli siege, near closure of the Rafah border crossing, and prolonged delays in reconstruction efforts, in addition to the long-standing fuel and electricity crises which remain without radical solution.
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.