CEIZ index for 2019: GDP in 2019 rose by 3.0 percent

February 11, 2020

CEIZ index in December 2019 amounted to -0.03 index points, which is the highest index value recorded in the last quarter of 2019. Tourist arrivals in December rose, on an annual level, at the rate of 6.5 percent and were followed by retail sale at only slightly lower growth rate. However, industrial production, which has been recording mostly negative annual growth rates since the beginning of summer, also recorded in December a decrease of -0.2 percent. Mostly due to negative trends in industrial production in November and December, but also due to a drop in state budget income from VAT revenues in October and November, the index recorded decreases in value on a monthly level in two out of three months of the last quarter. All this points to slowing down of the economic activity compared to the third quarter. Moreover, the CEIZ index value in the last quarter points to slowing down of the economic activity growth rate on an annual level as well.

Based on CEIZ index movements, we expect that real GDP growth rate in the fourth quarter of 2019, compared to the same period in 2018, could have amounted to 2.5 percent*, which is somewhat above the expectations based on the data for October and November. Seasonally adjusted data show that, in the last three months of 2019, GDP was -0.2 percent lower compared to the previous quarter. If we take into account the previous quarters, when real GDP growth rates amounted to 4.1, 2.4 and 2.9 percent, we expect that in the entire 2019 GDP could have risen by 3.0 percent..

* Monthly assessment of GDP growth rate based on CEIZ index value is indicative and should be used primarily as information on the current condition and trend of the business cycle in Croatia.

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. 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.

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