The Monthly PMA Business Cycle Index (PMABCI) – October 2015
The index declined in both the West Bank and Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for October 2015. These results showed that the overall PMABCI has notably declined from 13.2 points during September to around 8.0 points this month, in the wake of a drop in the indices of both the West Bank (WB) and Gaza Strip (GS). However, data showed a much higher overall index in October than in the corresponding month of 2014, which followed the Israeli war on GS, and when the index was about -13.7 points.
In the WB, the index dropped from 17.2 points during September to around 12.2 points during this month, reflecting a decline in the indices of the main industrial sub-sectors. The food index declined from 2.0 points to around 0.7 points, while the textile index decreased from 5.0 points to 2.2 points. Moreover, indices of plastic, furniture, chemical and pharmaceutical, and engineering sub-sectors have all declined during the comparison period. In contrast, the index of the construction sub-sector has moderately improved, while the index of the paper industry marginally increased during the same period.
The drop of the WB index resulted from a reduction in sales and accumulated inventory, as industrial firms’ owners indicated. The recent political and security turmoil in the WB and Jerusalem, that started at the beginning of this month, had a deep adverse effect on the near term expectations, with both production and employment levels anticipated to decline during the three coming months.
Likewise, Gazan index has witnessed a fall during this month to around -7.8 points compared to -2.1 points in the previous month. Most industrial sub-sectors have declined during this month, mainly the textile sub-sector’s index, which decreased notably from 4.6 points to 1.1 points. Moreover, indices of paper, plastic, furniture, and engineering sub-sectors have all declined during the comparison period. On the other hand, the index of the chemical and pharmaceutical sub-sector has slightly improved, while the remaining sub-sectors’ indices maintained their previous values.
As in the WB case, Gazan industrial sales have declined and inventory accumulated. Moreover, industrial firms' owners expect lower production levels in coming months affected by the recent turmoil in the WB, Jerusalem and, to a lesser extent, the GS. This turmoil occurs while Gazan industries continue to struggle with the same obstacles, including 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. As a result of all the previous factors, pessimism about the near future has notably increased this month.
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.