CEIZ index for April 2018: 2.4 percent real GDP growth rate in the second quarter of this year

In April 2018, CEIZ index registered a slight decrease in value of 0.13 index points compared to the month before. At the same time, the April index value was lower by 0.15 index points compared to the average index value in the first quarter of 2018. This indicates that the economic activity has remained at approximately the same level as at the beginning of the year, when the quarterly GDP growth rate was 2.5 percent. However, since the index value in April 2018 was lower compared to April 2017, we can conclude that the growth of economic activity at the beginning of the second quarter of 2018 was not as strong as in the second quarter of 2017. At the same time, all the index components recorded growth on an annual level, particularly VAT revenues, which in April 2018 achieved a real growth rate of 28.7 percent on an annual level. Based on CEIZ index movements, we expect a 2.4 percent real GDP annual growth rate in the second quarter of 2018, which is just slightly weaker than the 2.5 percent GDP growth rate recorded in the first quarter of 2018. Seasonally adjusted figures indicate that GDP grew by 0.8 percent in the second quarter of 2018 compared to the previous quarter. However, to analyze the business cycle in the second quarter of 2018 with greater certainty, we will have to wait for the CEIZ index values for May and June to become available.

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, or rather, recession.

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