The Monthly PMA Business Cycle Index (PMABCI) – March 2016
Slight decline in the Index due to a significant drop in Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for March 2016. The results showed that despite the improvement in the West Bank (WB) index, the notable decline in the Gaza Strip (GS) index has pushed down Palestine's overall PMABCI. Thus, the overall index slightly decreased to around 5.4 points this month, compared to around 6.6 points during last February, and around 8.5 points in March 2015.
In the WB, the March 2016 index remained close to its value in February, increasing by only one point to around 11.0 points, supported by the improvement in industrial sub-sectors' indices of construction (from -2.2 points to -0.5 points), paper (from 0.2 points to 0.7 points), leather (from -0.6 points to -0.3 points), and furniture (from 2.0 points to 2.8 points). However, the remaining sub-sectors indices remained either stable or marginally declined. Moreover, the owners of industrial firms show higher optimism regarding production and employment in the near future.
In contrast, the highly volatile Gazan index witnessed a sudden drop from -1.6 points in February (the highest for last the 8 months), to around -10.7 points this month. This drop resulted from a notable decline in the indices of tow sub-sectors: textiles (from 4.5 points to 2.3 points) and construction (from -6.8 points to -11.0 points), and minor declines in the indices of the plastic and engineering sub-sectors. Also except for a slight increase in the index of the furniture sub-sector, the indices of the remaining sub-sectors remained stable.
The above-mentioned decline in the Gazan index resulted from a drop in production and demand, and a rise in accumulated inventory. Those developments reflected a weakening outlook among industrial firms owners, whose pessimism about the near future has increased again, resulting in negative forecasts for future production and employment.
It is worth mentioning that except for June 2015, Gaza's index remained in the negative range for more than two consecutive years, which reflected the dire and worsening political and economic conditions in the Strip, as the factors contributing to this deterioration persisted. These factors included deficiencies in raw materials; shortages in electricity and fuel supplies; and prolonged delays in reconstruction efforts, in lifting the Israeli blockade, and in opening the Rafah border crossing
It is worth mentioning 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.