CEIZ index for January 2021: Mild growth of quarterly GDP at the beginning of the first quarter

March 18, 2021

In January 2021, CEIZ index decreased in value by 1.1 index points compared to the same month in 2020, while compared to the previous month, it registered a growth of 1.1 index points. When observing index components, compared to the previous month, state budget income from VAT revenues and industrial production index registered a lower seasonally adjusted value in January, while the number of tourist arrivals and retail trade registered a growth in monthly value. The mentioned index movements suggest that the economic activity measured with quarterly GDP change rates, in the first quarter of 2021, slightly accelerated compared to the previous quarter, suggesting a continued gradual recovery of the economy, which had started during the summer months. However, annual GDP change rate in the first quarter of 2021 is expected to remain negative, but of lower absolute value than the rate registered in the fourth quarter of 2020 (-7.0%), due to extended measures of partial economy lockdown, which has been in force since the end of November 2020. Projections of quarterly and annual GDP change rate in the first quarter of 2021 will be published when projections of CEIZ index for February and March 2021 become available.

* 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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