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The PMA Monthly Business Cycle Index (PMABCI) – October 2014
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The PMA Monthly Business Cycle Index (PMABCI) – October 2014

October brings a relative improvement in the business cycle

The PMA has released the results of its Business Cycle Index (PMABCI) for October 2014. The results showed that the overall PMABCI witnessed a relative recovery by increasing from -36.1 point in September to around -13.1 point in October. This improvement came due to the cease of the Israeli attack on GS. But compared with the corresponding month of 2013, the index shows a decline, where it was -0.6 point.

In general, the relative improvement in the index is associated with many considerations. Some of these are related to the start of school year and the return of students to schools and universities, which has led to an increase in activity and demand for educational supplies. The preparations for many social events (weddings, holidays… etc.) and increasing crossing points activities due to easing some of the Israeli restrictions also helped boost optimism regarding gradual recovery of industrial activity in the near future.

In the WB, the business cycle index witnessed an increase from -21.3 point in September to around -15.8 point this month, due to the improvement in textile, leather, paper, plastic, and chemical and pharmaceutical sub-sectors (which improved from -0.8 point to 0.4 point). However, data revealed a decline in the performance of wood, furniture, and food sub-sectors that declined from -0.7 to -1.8 point between September and October.

The improvement in WB’s index reflected the increase in demand (consumption) during Eid Al-Adha and the rise in pharmaceutical products during and after the Israeli attack on Gaza. The improvement in the industrial activities in the WB is accompanied by a decline in industry's pessimism regarding future production and employment, especially after the cessation of the Israeli attack on Gaza.

In GS, the index witnessed an improvement during October reflecting the increase in demand for commodities after the end of the 51-day Israeli attack, in which people and establishments suffered from the harsh siege and destruction. The index increased from -82.6 point in September to around -1.8 point this month. Such improvement reflected resumption of operations by all industrial sub-sectors, especially the food sub-sector which rose from -29.1 point to -1.8 point, construction sub-sector which went up from -12.2 point to 3.9 point, and metallic industrieswhich improved from -18.9 point to 5.9 point between September and October.

Although pessimism dominated during the past two months in GS, the situation shifted to the better this month. Data revealed that the industries in the GS are optimistic regarding future production and employment. This optimism is supported by movement of the international community to reconstruct Gaza, and promises of opening Rafah cross-border. Added to that, is the positive impact and support of the national product campaign, which was highly valued in GS.

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 noting performance of the industrial sector, especially fluctuations in the production and employment levels and 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. Following that, the data is processed to construct a quantitative PMABCI.

It is 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, the better the economy is. However, 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.

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