CEIZ index for August 2019: Real GDP growth of 2.4 percent in the third quarter

October 15, 2019

After somewhat lower levels in June and July 2019, CEIZ index value in August was somewhat higher, but still did not reach significantly higher levels from January or May this year. Although the index has been registering a decrease in its value on the annual level since January 2019, in the first two months of the third quarter of 2019 this decrease even accelerated in comparison to the previous three months and amounted, on average, to -1.6 points. According to the seasonally adjusted real values, three out of four CEIZ index components rose compared to July, while state budget income from VAT revenues recorded, in one month, a drop of -14.2 percent. On the annual level, the highest growth was recorded for tourist arrivals, which were higher by 7.8 percent compared to August 2018.

In comparison to the second quarter of 2019, the index cumulatively rose in July and August by 0.6 index points. At the same time, the average index value in July and August was 1.4 index points lower compared to the average index value in the third quarter of 2018. Such CEIZ index dynamics point to the fact that, in the third quarter of 2019, economic activity grew slower compared to the same period last year, but also to the fact that it slightly accelerated compared to the previous three months. Based on CEIZ index movements, we expect the annual growth rate of real GDP in the third quarter of 2019 to amount to 2.4 percent, which is equal to the official growth rate of real GDP in the second quarter of this year. Seasonally adjusted data point to the fact that, compared to the previous quarter, GDP in the third quarter of 2019 rose by 0.6 percent.

* Monthly assessement 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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