Palestine Monetary Authority Business Cycle Indicator (PMABCI) Results of July

An increase in both the WB and GS

The PMA has launched the results of July PMABCI. The PMABCI is a monthly index which aims to capture the state and evolution of the Palestinian business environment overtime, especially in the manufacturing sector and the impact on economic activities at large.

In specific, the index reflects fluctuations in output and employment in the manufacturing sector and the impact on the overall Palestinian economy. The index also provides real-time information about the economy, and thus helps in taking the appropriate decisions without having to wait for the release of actual data on macroeconomic indicators that need longer time to produce.

The construction of the index follows international standards and is based on qualitative data obtained from monthly business surveys, all belonging to the manufacturing sector, and selected via stratified random sampling. The respondents are asked a number of qualitative questions related to production, sales, inventories, and near-term expectations about production and employment. The answers are then weighted according to each industry's share in total employment in the manufacturing sector, yielding a single value ranging from -100 (poor performance) to +100 (the highest score, indicating strong business performance and positive prospects). More than its absolute values, the evolution of the index over time is what reflects activity over the business cycle.

At the national level, the overall PMABCI indicates a large increase in July 2013, from -7.71 in June 2013 to -1.21.The behavior of the index has been different in the West Bank (WB) and Gaza Strip (GS). In WB, a high increase took place from -11.99 in June 2013 to 2.21 in July. This increase, in turn, indicates a further improvement in expectations about the economic performance in WB in the short run. The figures also reveal the apparent fluctuations in the WB economic performance in the previous months as a result of various political and economic factors, especially the unclear prospect regarding the peace process and resuming the Palestinian-Israeli negotiation, in addition to the continuous political schism between the WB and GS.

In GS also, there was a slight increase during the last month, although the index remains at a positive 1.76, indicating economic performance close to levels attained since December 2012. In general, GS still suffers from Israeli siege and political uncertainty that affect various aspects of life, and significantly impact economic performance negatively, discourage economic recovery, and, as a result, limit expectations about any economic improvement in the short run.

In general, the overall index indicates that recovery in economic activity that took place during the past months of 2013 was back on the track in July, as a result of improvement in some industrial sectors such as food industries (index increased from 0.37 to 1.97) and furniture (from 0.24 to 1.75). On the other hand, engineering industries suffered a large contraction (index decreased from -0.6 to -3.98).

Source: PMA (2013). PMABCI, July 2013.