CEIZ index for April 2019: 4.7 percent real GDP growth in the second quarter of this year

June 12, 2019
In April 2019 CEIZ index recorded its highest value since the end of 2016, while compared to the previous month its value increased by 0.8 index points. The index value in April was also 0.8 index points higher than the average index value in the first quarter of 2019. This suggests that the economic activity in the country accelerated compared to the beginning of the year, when the quarterly GDP change rate amounted to 3.9 percent. In addition, considering that the index value in April 2019 was 1.8 index points higher compared to the same month last year, we can conclude that strengthening of economic activity at the beginning of the second quarter of 2019 was more intense than a year ago. At the same time, all CEIZ index components grew on an annual level, particularly tourist arrivals, which were 16.4 percent higher on an annual level, and VAT revenues, which in April 2019 achieved a real growth rate of 13 percent on an annual level. Based on CEIZ index movements, we expect a 4.7 percent real GDP annual growth rate in the second quarter of 2019, which is an acceleration from the 3.9 percent GDP growth rate achieved in the first quarter of 2019. Seasonally adjusted figures indicate that in the second quarter of 2019 GDP rose by 1.6 percent compared to the previous quarter. In order to analyze the business cycle in the second quarter of 2019 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.


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