The Monthly PMA Business Cycle Index (PMABCI) – July 2016 The Index Hits a new Record in West Bank, and Improves in Gaza

The PMA has released the results of its Business Cycle Index (PMABCI) for July 2016. The results revealed an increase in Palestine's overall index, reflecting a relative improvement in the West Bank (WB) index, accompanied with a slower deterioration in the Gaza Strip (GS) index. The high sales during the holy month of Ramadan and Eid Al-Fitr have both added to the overall index value, which soared to about 15.1points during this month, compared to 10.5 points during last June, and around 4.8 points during corresponding month of 2015.

In the WB, the index rose again, but marginally (by 0.75 points) reaching 25.7 points during July. However, this increment was sufficient to put the index value above its June level, which was itself a record high since PMA started calculating the index about four years ago. At any rate, this improvement reflected mainly the changes in the industrial sub-sectors' indices, which ranged between a moderate increase to a slight decline. For on one side, many sub-sectors' indices rose during this month: mainly, the food industry index (from 6.4 points to 8.5 points), the textile industry index (from 6.2 points to 7.8 points), and the engineering industries index (from 3.8 points to 4.4 points).

Of the remaining sub-sectors' indices, some declined, particularly the furniture industry whose index fell from 6.4 points to around 3.2 points.  Anyhow, the sharp increase during July is mainly attributed to a higher sales level, accompanied with declining inventory during the season of Ramadan and Eid Al-Fitr, as formerly mentioned. Moreover, industrial firms' owners continued to show higher optimism regarding expected employment in the near future.

Likewise in GS, the highly volatile Gazan index also progressed as it improved from     -25.2 points last month to -19.1 points during July. This increase reflected a noticeable pick up in the indices of all industrial sub-sectors, except for the remarkable decline of the construction index due to the lack of raw materials (from -5.8 points to -11.0 points), and the drop in engineering industries index (from 0.0 to -6.8 points). Conversely, food industry index the rose from -9.3 points to 2.1 points, and the textile industry index improved from -6.8 points to around -2.3 points, while the remaining sub-sectors' indices increased either moderately or slightly.

As it is the case in the WB, the improvement in the Gazan index resulted from a rise in sales, and a decline in inventory. Those developments were reflected in a better outlook among industrial firms' owners, whose pessimism about the near future has abated this month, resulting in better forecasts for future production and employment. Nevertheless, the Gazan index remained in the negative range for more than two consecutive years (except for June 2015), which reflected the dire and worsening political and economic conditions in Gaza as several negative factors persisted. Thus, supplies of raw materials, electricity and fuel remained deficient; and prolonged delays in reconstruction efforts, lifting the Israeli blockade, and opening the Rafah border crossing continued.

It is also 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.