The extended PMA Business Cycle Index (extended PMABCI) – March 2018
Drop in the West Bank and improvement in Gaza
The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for March 2018. The new index surveys, beside the industrial sector, six additional sectors, namely: agriculture, trade, construction, transport and storage, IT and renewable energy. The overall index increased during March, supported by the notable improvement in the Gaza Strip’s index and despite the deterioration in the West Bank’s index. As such, the overall extended PMABCI picked up slightly to -0.6 compared to -1.8 points in February and -16.4 points in March 2017.
In the WB, the index slipped to 10.7 points this month compared to 12.4 points in February, owing to falls in most economic sectors' indices. The drop of industry and agriculture indices proved to be the engine of this fall, as the former declined from 4.3 points to 2.3 points, and the latter fell from 7.2 points to 4.0 points. Moreover, in the WB the indices registered further declines in the construction sector (from 0.4 to 0.2 points), the transport and storage sector (from 0.3 to -0.4 points) and the communications and IT sector (from 0.3 to 0.1 points). Meanwhile, the renewable energy index relatively stabilized at 0.0 point. Conversely, the trade sector index jumped from -0.1 points to 4.6 points during the comparison period.
Overall, the drop in the West Bank's index reflected lower production and accumulated inventory during March and worse future expectations about production, as indicated by economic firms' owners.
Conversely, the index in GS resumed improvement, growing from -35.4 in February to -27.5 points in March due to increases in all sectors' indices, albeit at varying degrees. This rise was due to the improvement in the trade index (from -20.6 to -18.4 points), and the agriculture index (from -4.9 to -2.0 points). It also reflected lesser increases in the indices of: industry (from -6.8 to -4.9 points), construction (from -1.6 to -1.2 points), transport and storage (from -1.2 to -0.9 points), and communication and IT (from -0.3 to -0.1 points). Meanwhile, the renewable energy index grew marginally, from -0.04 points 0.0 points.
It is worth noting that the Gazan index register mostly negative values, which reflects the adverse long-lasting political and economic conditions in the Strip, the continued Israeli siege, and the prolonged delays in reconstruction efforts. However, production and sales levels improved during this month, along with higher optimistic future expectations about production in the coming three months, as indicated by Gazan firms' owners.
It is noteworthy that the PMA has extended its business cycle index to increase its scope and coverage of the economy. The new index’s sectors form collectively around 60% of GDP (at factor cost) in Palestine, compared to only 15% under the previous industry-based index. The extended index still excludes the services and financial and insurance activities, whose inclusion remains a challenge due to various measurement difficulties. In sum, the extended PMABCI is a monthly index which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production and employment levels). The maximum value of the index is positive 100 points, while the minimum is minus 100 points; 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.