The Monthly PMA Business Cycle Index (PMABCI) – March 2017
A slight decline in the index despite its improvement in Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for March 2017. The results revealed that Palestine's overall index was relatively stable, compared to the previous month. The index trended differently in the two regions: worsening in the West Bank and improving in Gaza Strip. As a result, the index fell to -12.1 points, increasing by only 0.2 point from the previous month, but remained well below the corresponding month in 2016, that scored 4.0 points.
In the WB, the index remained in the negative zone for the third consecutive month, declining to -9.7 points compared to -5.1 points in the previous month. The main decline was in the food index (from 3.1 points to 1.2 points), followed by a fall in the construction industries' index (from -1.5 points to -2.7 points) due to the stagnation in construction activities. Also the engineering industries' index dropped from -0.7 points to -2.9 points, while the indices of leather, paper and plastics have also all declined, albeit to a lesser degree. On the other hand, increases were slight for the indices of textile and furniture, but the traditional industries' index notably rose (from -4.7 points to -2.1 points).
Simultaneously, the industrial firms' owners indicated an accumulation in inventories during this month, which implied lower expectations regarding production in the three coming months.
Conversely, the highly volatile index in GS has picked up from the very low level of -35.1 points in last February to -14.8 points this month. This improvement came as the indices of all sub-sectoral activities have improved, except for a slight decline in the plastic industry. Some activities' indices have increased remarkably, headed by the construction industries' index, which is characterized by high volatility reflecting the flow and ebb of building raw materials entering the strip, with the index picking up from -8.8 points to -2.2 points. Moreover, the indices of the engineering industries and furniture rose notably (from -7.5 points and -7.7 points to -1.7 points and -3.9 points, respectively). Meanwhile, the increases in the food, textile and paper indices were much lower. It is worth noting that all indices of Gazan industrial activities remained in the negative zone this month. Also noted is the improvement in sales of the Gazan industrial firms during March, which resulted in higher expectations regarding production and employment during the three coming months.
However, the above-mentioned improvement doesn't negate the generally dire economic and political conditions that continued to adversely affect the economy in Gaza, especially the industrial sector in particular. Moreover, all industrial firms' owners foresaw the same or slightly worse performance during this month. Furthermore, Gazan index remained stuck in the negative area for more than three consecutive years (except for June 2015) under 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.