The Monthly PMA Business Cycle Index (PMABCI) – March 2015
A substantial improvement in the index
The PMA has released the results of its Business Cycle Index (PMABCI) for March 2015. The results showed that the overall PMABCI witnessed a significant improvement to around 12.2 points in March, compared to 2.4 points, and 8.6 points in the previous and the corresponding months, respectively.
This expansion reflected a remarkable increase in the West Bank's index, which notably shifted from 3.3 points during February, to around 16.2 points this month, due to the improved performance of all sub-sectors by varying proportions, with the exception of slight declines in the food, chemical and pharmaceutical sub-sectors. This improvement also reflected increased optimism among industrial firms of a rising demand and production in the coming months, with the positive expectations of an end to Israel's withholding Palestinian clearance revenues, following Israeli elections later this month. This crisis had depressed demand and production during the past two months with a delay and cutoff in public sector salaries (to just 60% of their totals for the third consecutive month).
In GS, the index deteriorated for the second consecutive month, moving from -12.8 in February to around -14.2 this month, due to reduction in production and employment levels, accompanied with increased inventory. During March, the vast majority of industrial sub-sectors declined to various extents, except for food and engineering sub-sectors. Moreover, construction deteriorated for the fourth consecutive month due to Israel's barring the entry into GS of needed building and reconstruction materials in sufficient amounts.
Accordingly, pessimism about the near future has heightened again in GS as firm owners shared apprehension about production levels in the coming months. These fears were based on the continued electricity and fuel crises in GS, in addition to a prolonged delay in fulfilling commitments towards the reconstruction of Gaza, the lifting of the blockade, and opening Rafah border crossing. Furthermore, there were concerns about a drop in private consumption given the abovementioned disruption of public servants' salaries.
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 construction of the indicator is based on qualitative data obtained from monthly business surveys of a representative sample of industrial institutions’ owners/mangers as to the value of various leading indicators during a specified period, and their expectations for the coming months. Afterwards, the data is processed to construct a quantitative PMABCI.
It is also important to note that the maximum value of the PMABCI is positive 100 point, while the minimum is minus 100 point; a positive value indicates favorable economic performance, and the bigger this value is, the better the economy. Similarly, a negative value indicates that economic performance worsens the closer this value approaches minus 100. 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.