CEIZ index for June 2019: Slower GDP growth rate in the second quarter of 2019

August 12, 2019

CEIZ index in June 2019 registered its lowest level this year and was -0.3 index points lower compared to the previous month and -0.6 index points lower compared to June 2018, indicating thereby the biggest year-on-year decrease in index value registered in 2019. Considering that the index also had a negative value in May, a downward trend has been observed pointing to slower growth rate. Seasonally adjusted figures show that, in the second quarter, three out of four index components registered an increase in value when compared to the first quarter. These are, in higher-to-lower order: state budget income from VAT revenues, number of tourist arrivals and real growth in retail trade, while industrial production recorded a decline.

Based on CEIZ index trends, we expect the annual real GDP growth rate to amount to 3.1 percent* in the second quarter of 2019, which is somewhat weaker than the 3.9-percent GDP growth rate achieved in the first quarter of 2019, but is bigger than the rates recorded in 2018. Seasonally adjusted data indicate that GDP grew by 0.4 percent in April, May and June of 2019 compared to the previous quarter.

* 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.


Attached documents