CEIZ Index

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CEIZ index for September 2017: September decreases GDP growth in the third quarter

In September of 2017, the CEIZ index dropped by 0.6 index points compared to the same period of the previous year, which is the highest annual decrease in the index value since February of this year. In August and September, CEIZ recorded a drop both on the annual and monthly level, which suggests a slowdown of the business cycle. The low index value in September can be attributed mostly to reduced VAT revenues, coupled with a somewhat weaker industrial production growth.

Based on the CEIZ index movements, we expect real GDP to grow by 2.7 percent in the third quarter of 2017 compared to the same period of the previous year, indicating a stagnation considering the first two quarters (when the average GDP growth rate was 2.7 percent). According to seasonally adjusted figures, in the third quarter of 2017 GDP grew by 0.9 percent quarter-on-quarter, which is the same growth rate recorded in the previous quarter.
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What is CEIZ? 

C
oincident 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. Details on the CEIZ index methodology are described in the paper: Rašić Bakarić, Ivana, Marina Tkalec and Maruška Vizek, 2016, “Constructing a Composite Coincident Indicator for a Post-Transition Country”Ekonomska istraživanja (Economic Research), 29 (1), pp. 434–445.

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.

The index is to be interpreted in such a way that the positive values represent economic growth while the negative ones represent a decreased economic activity, or rather, recession.

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