The Monthly PMA Business Cycle Index (PMABCI) – November 2015
The index declined further in both the West Bank and Gaza
The PMA has released the results of its Business Cycle Index (PMABCI) for November 2015. These results showed that the indices of both the West Bank (WB) and Gaza Strip (GS) had notably declined for the second consecutive month. Hence, overall PMABCI dropped to around -16.8 points this month compared to 8.0 points during last October, and -6.5 points in November 2014.
In the WB, all industrial sub-sectors have declined, except for food and traditional industries which relatively stabilized. However, the textile sub-sector declined sharply from 2.2 points to -11.2 points between October and November, followed by a decline in construction from 2.0 points to -2.5 points during the same period. In sum, the WB index dropped severely to the lowest value in a year (-20.3 points), compared with moderate levels in previous months at 12.2 points.
The production index in the WB markedly declined this month, as a result of a reduction in sales and accumulated inventory, as industrial firms’ owners indicated. Moreover, the recent political and security turmoil in the WB that started at the beginning of previous 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, most of Gazan industrial sub-sectors decreased, particularly food industry whose index dropped from -2.1 points to -9.3 points during comparison period. Moreover, indices of construction, furniture, and chemical and pharmaceutical sub-sectors have all declined during the same period. In sum, Gazan index has witnessed a further fall during this month to around -13.0 points compared to -7.8 points in the previous month. It is noteworthy that except for July 2015, Gazan index remained at a negative zone for two consecutive years, which reflects the continuous weak and deteriorating political and economic conditions in the strip, as the problematic factors continued to prevail. Those factors include 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.
In addition to the above-mentioned factors, Gazan industrial firms have suffered this month from a weak demand, and hence, weak production. Those are reflected in a higher pessimism about the near future, along with expectations of weak production and declining employment in coming months, as the industrial firms' owners indicated.
On another note, the WB index (-20.3 points) has declined this month below its level in GS (-13.0 points) for the first time in a year. This may indicate the owner firms' growing fears that the current political and security turmoil with continuity to deteriorate, and its possible adverse impact on economic performance.
It is worth to mention 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.