CEIZ Index

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CEIZ index for April 2017: GDP growth continues to decelerate in the second quarter

In April, the CEIZ index value was slightly lower than in March, falling merely by 0.1 index point. However, we cannot neglect the fact that the index has been dropping for the fourth consecutive month and that, compared to December of last year, its value has cumulatively decreased by two full index points. In comparison to the first quarter average, in April CEIZ is lower by 0.5 index points, which points to a worsening business cycle. For a more definite conclusion about the business cycle in the second quarter of 2017, we will have to wait for the CEIZ index values for May and June.

Just in April of this year, the index fell by 1.4 points compared to the same period last year, which is the largest annual decrease in the CEIZ value since January 2013, when the Croatian economy was in a recession. At the same time, half of the index components have increased on the annual level, notably tourist arrivals which in April 2017 achieved an annual growth of 40.1 percent. Industrial production, however, has recorded a significant fall of -4.5 percent, which is the largest negative contribution to the CEIZ index value in April of this year.
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Measured on an annual basis, CEIZ points to a deceleration in economic activity. Based on the CEIZ index movements, we expect the real GDP growth rate in the second quarter of 2017 to amount to 1.9 percent when compared to the same period of the previous year. Seasonally adjusted data indicate that GDP grew by a very modest 0.2 percent in the second quarter of 2017 compared to the previous quarter.
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.

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

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