The Monthly PMA Business Cycle Index (PMABCI) – January 2017
Decline in the indices of the West Bank and Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for January 2017. The results revealed a drop in Palestine's overall index, due to the decline in the indices of both the West Bank and Gaza Strip. As a result, the overall index slipped from 2.7 points in December to around -6.1 points. However, the index achieved a better level than registered in January 2016, (-6.6 points).
In the WB, the index declined to the negative zone for the first time in a year, scoring -0.4 points, compared to around 7.7 points in the previous month. This fall came as most industrial sub-sectors' indices declined, mainly the drop in textile index (from 0.4 points to -2.6 points),and in the food index (from 4.0 points to 2.5 points), along with lesser drops in indices of the sub-sectors of: leather, plastic, furniture, wood industries, engineering industries, and chemicals and pharmaceuticals. However, the paper index stabilized at 0.5 points, while the construction industries index slightly improved (from 0.1 points to 0.5 points).
According to the industrial firms' owners, the production and sales came lower than both the previous and the earlier expected levels. Nevertheless, their expectations about near future is still relatively high, showing more confidence regarding production and employment levels in the three coming months.
In GS, the highly volatile index has continued to deteriorate, falling again from -15.4 points last December to around -21.2 points this month, which keep it stuck in the negative area to date for more than three consecutive years (except for June 2015). This slip came as a result of a significant decline in the indices of main industrial sub-sectors, most notably, food and furniture. The former deteriorated from -2.8 points to -8.3 points, while the latter contracted from 4.3 points to 1.7 points. Moreover, the sub-sector indices of textile, paper, and engineering have also declined. Nonetheless, the indices of plastic, and chemicals and pharmaceutical sub-sectors have marginally improved, and the construction industries index strengthened at faster pace; but all remained in the negative area.
Gazan industrial firms indicated a decline in sales during January, which resulted in accumulated inventories. In addition, pessimism exacerbated among firms' owners, particularly regarding employment in the near future. This ensued as severe obstacles continued to suppress economic activity in GS, 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 crisis which remains without radical solution.
It is noteworthy that the PMA has revised and updated the PMABCI for former months as it is demonstrated in the following figure. However, the index's general trend was unaffected. 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.