Interpretation of the CEIZ
index up to April 2013
In April of this year
the CEIZ index registered a
0.34-point increase compared to the month before, but this was nevertheless the
third lowest index value in the last 13 years. However, the downward trend of
the year-on-year index rate slowed down in April to -3.6 percent, which is the smallest
negative rate in the last 14 months. These developments indicate that economic
activity has accelerated at the beginning of the second quarter compared to the
first quarter of 2013, when a decline in seasonally adjusted GDP was recorded
(-0.1 percent). On the other hand, the recent oscillations in the CEIZ index
point to alternating periods of months with growth and months with falls. Consequently,
it is impossible to confirm whether the seasonally adjusted GDP trends have
changed direction in the second quarter of 2013. For a more conclusive
evaluation of the business cycle, we should wait for the May values to
determine whether Croatian economic activity has reached its trough.
What is CEIZ?
Coincident Economic Index of the Institute of Economics, Zagreb (CEIZ) is a monthly composite business cycle indicator developed by the Institute of Economics, Zagreb. Its purpose is to provide timely information on the current business cycle condition. Consequently, the CEIZ index value changes simultaneously with the business cycle, thus indicating the present state of the economy. The CEIZ index was constructed by applying in parallel a dynamic factor model and a Markov switching model.
The CEIZ index is useful in three ways. First, it is a single-number business cycle indicator containing information that would otherwise have to be accrued by analyzing a large number of economic series. Second, unlike the GDP series, it provides monthly estimates on the state of the economy, thus providing information on fine changes that took place in a short period of time. Third, the CEIZ index is available one to three months prior to quarterly GDP estimates, meaning that policy-makers and the general public can observe the current state of the economy in a timely manner.