The shops are full of Israeli food and clothes but most people in Gaza can barely afford them. Construction projects - sewage treatment plants, schools - are getting started but far fewer than needed. The border with Egypt, once sealed, is open but few cross because a security clearance is hard to obtain.
And rockets and mortar shells fly daily from Gaza City into Israel as Israeli troops carry out brief raids.
Two years after the Israeli military swooped in a three-week war that destroyed thousands of buildings, killed about 1300 people and largely deterred rocket fire, things are starting to shift again in Gaza. But they seem to be shifting backwards, creating a sense of deja vu. The economic siege is easing and the border is heating up. Israel hoped the blockade would break Hamas. Instead, Hamas is in charge, Israel is frustrated and another confrontation seems possible.
Advertisement: Story continues below
''Everyone in the Israeli government knows this situation cannot go on forever,'' said an Israeli official who insisted on anonymity because of the delicacy of the topic. ''It is an illusion to think that there can ever be peace here with Hamas in power.''
Just as such talk is common in the Israeli security establishment, so in Gaza official talk of resistance and rejection is standard.
''I would rather die a martyr like my son than shake the hand of my enemy,'' Yusef Mansi, the Hamas minister of public works and housing, said of reconciliation with Israel.
Since September, when Israel and the Palestinian Authority began peace talks, 20 to 30 rockets and mortar shells a month have been shot into Israel, double the rate for the first part of the year. Although most seem to be the work of groups other than Hamas, Israel argues that Hamas is in charge and will be held responsible. While there is debate about whether the mutual hostility will produce another war, there is also a mild shift in daily life for the 1.5 million people living in the coastal strip. It involves a slow rebuilding of a kind of Gaza normality - always a painful normality since two-thirds of the inhabitants are refugees and 80 per cent depend on foreign aid.
A recent report by 22 human rights and aid organisations said Israel had not yet met its obligations to alter its policy and that life in Gaza remained unchanged. Construction, the greatest need, is the slowest effort to get started because Israel fears that cement, gravel and steel, if allowed in unsupervised, would be diverted to Hamas's military effort.
Tony Blair, the international envoy to Palestinian institutions, said an important way to counter Hamas's supremacy was to support an alternative power base in the private sector, which tended to favour the West.
But the risks are real. Ibrahim Abrach, who teaches political science at Al-Azhar University in Gaza and opposes Hamas, said the easing of the Israeli siege was strengthening Hamas.
He said that in recent months, as conditions had eased, Hamas had grown bolder in its suppression of dissent. His apartment has been broken into and his computer taken, he said, and he had been called to the internal security office twice.