The PMA Monthly Business Cycle Index (PMABCI) – December 2014
Improvement continues in the business cycle
The PMA has released the results of its Business Cycle Index (PMABCI) for December 2014. The results showed that the overall PMABCI witnessed an improvement, increasing from -3.6 points in November to around -0.3 points in December. Such improvement comes due to relative improve in the business cycle and industrial production in both the West Bank and Gaza Strip, accompanied with expectations of further improvement in the coming months. Similarly, the result also indicates a relative improvement compared with the corresponding month of 2013, where it was -8.3 points.
In the West Bank (WB), the index has relatively improved from around -2.8 points in November to around -1.9 this month due to improvement in most industrial subsectors (leather, plastic, paper and others), particularly the recovery in construction, which improved from -3.1 points to around -1.6 points during the period of comparison. On the other hand, textile and food subsectors have witnessed slight declines during the same period. Consequently, the overall improvement comes as a result of the rise in current and expected production, accompanied with wary optimism about the near future.
In Gaza Strip (GS), the index also has recovered from -15.5 points during November, to around -6.0 points, this month due to improvements in most subsectors. Despite the decline in construction as a result of Israeli barring the entry of needed building materials, the improvements in other sectors managed to compensate for it. The highest increase was in the food subsector, which employs around one third of Gazan employees, where its index recovered from -13.7 points in November to around 2.3 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 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. After 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 is, the better the economy. Similarly, 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.