The Monthly PMA Business Cycle Index (PMABCI) – July 2015
A progress in the West Bank and a decline in Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for July 2015. The results showed that the overall PMABCI has improved from 4.8 points during June to around 7.5 points this month, mainly due to the improvement in the West Bank (WB), and despite the decline in Gaza Strip (GS). Also, the results showed a higher value than achieved in the corresponding month of 2014 (-6.9 points).
In the WB, the index has improved to around 12.0 points this month, compared with 5.1 points during June, supported by the improvement in most industrial sub-sectors, particularly the food sub-sector (from 4.4 points to 7.1 points) and textile (from -1.1 points to 6.7 points) during the comparison period. Moreover, the paper, plastic, engineering and furniture sub-sectors have all witnessed minor improvements in the same period. On the other hand, the index of the leather sub-sector has decline from 0.4 points to -1.5 points in July.
The improvement in the WB was due to an expansion in production and higher demand during the holy month of Ramadan and Eid, from residents, expatriates, and Palestinian living in Israel; the upturn was most noticeable in better food and textile indices. Also, a positive outlook for the short horizon has prevailed, reflecting expectations of better production and employment levels in coming months.
In contrast, the opposite trend emerged in GS, as the index started to deteriorate again following a short-lived recovery in June. The food sub-sector did not seem to benefit from a higher demand during Ramadan as did its counterpart in the WB. The index for food has fallen from 2.1 points to -2.1 points during the period of comparison as a result of falling demand and production. In addition, the indices for the construction, furniture and engineering industries have all fallen in GS, while the modest improvement in the textile and plastic industries failed to arrest further deterioration in the overall index. As a result, the GS index fell from 1.3 points to -9.3 points in July. However, it remained higher than the levels attained in previous months.
Overall, optimism among firms' owners about the near future remained weak as Gazan industries continued to suffer from numerous obstacles. Beside deficiencies in raw materials (e.g. woods, some iron cylinders, and chemicals), industries also faced continued shortages in electricity and fuel supplies, and prolonged delays in reconstruction efforts, in lifting the Israeli blockade, and in opening Rafah border crossing.
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.