The extended PMA Business Cycle Index (extended PMABCI) – July 2019

Remarkable drop in the West Bank and slight improvement in Gaza

The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for July 2019. The results showed that the overall index has declined against the backdrop of significant decline in the West Bank’s index, despite the relative stability in the Gazan index. Moreover, the overall index is maintaining a negative value for the fourth month in a row in light of current public budget crisis. Accordingly, the overall index fell to around -13.8 points in July compared to -6.7 points in the previous month, and also to lower than its corresponding level of the last year (-4.9 points).

In the WB, the index fell from about 1.0 point in last June, slipping to negative area at -10.2 points. This comes due to significant falls in both indices of the industry and the trade, despite lesser pickups in the agriculture and the construction, while the three remaining sectors maintained the same previous level. The industry index witnessed the biggest change as its index slipped (from 4.8 to -3.4 points), followed by fall in the trade index (from -1.4 to -5.7 points). Conversely, the agriculture index rose (from -2.2 to -1.4 points) and the construction index grew (from -0.4 to 0.0 points). Meanwhile, and for the second consecutive month, the transport and storage index remained close to 0.2 points and both the renewable energy and IT indices maintained 0.0 level.

In general, the surveyed firm owners indicated a decline in production and sales during the previous period, which in turn resulted in accumulated inventory. In spite of their cautious optimism about future employment, the firm owners’ expectations on production in the coming three months declined remarkably.

Meanwhile,Gazan index continued its slow progress for the fourth consecutive month, achieving its best value in about 29 months (-24.1 points), compared to -24.9 points last month in light of mixed performance. Indices of the industry, the trade and the construction have all improved, while they declined for the remaining sectors, albeit at a lesser degree. The industry index picked up (from -5.7 to -4.4 points), followed by growth in the trade index (from -17.7 to -16.8 points) and slight increase in the construction index (from -0.5 to -0.4 points). However, the transport and storage index registered the biggest decline (from 0.0 to -0.7 points) followed by the agriculture index drop (from -1.0 to -1.5 points), while it was very marginal for both IT and the renewable energy, scoring -0.2 points and 0.0 points, respectively.

It is worth noting that the Gazan index has always registered negative values since the PMA started calculating the extended indices (since January 2017), which reflect the adverse long-lasting political and economic conditions in the Strip. During this July, and after a short recovery, production and sales deteriorated, leading to accumulated inventory, as indicated by firms’ owners, however, they expressed slightly better outlook about the near future.

It is noteworthy that 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.