CEIZ index for October 2019: Stagnation at the beginning of the last quarter

December 11, 2019

In October 2019, CEIZ index recorded a moderate growth of 0.7 index points compared to the same month last year, while compared to September 2019, the index registered a drop of 0.1 index points. When compared to October 2018, we owe a higher index value to an increase in tourist arrivals which rose by 11.7 percent and, to a lesser extent, to higher retail trade volume, which rose, in the observed period, by 3.1 percent. Although, according to the seasonally adjusted data, both mentioned index components also rose compared to September 2019, industrial production and state budget income from VAT revenues brought a negative contribution and, in that way, set a short-term descending direction for the index. CEIZ also recorded in October a slight increase in value compared to the last quarter of 2018 and a very mild decrease compared to the previous quarter, suggesting a stagnation of the economic activity at the very beginning of the fourth quarter.

Based on CEIZ index movements, we expect the real GDP growth rate in the fourth quarter of 2019, compared to the same period last year, to amount to 2.7 percent*, which is a somewhat lower GDP annual growth rate compared to the third quarter of 2019, when GDP registered a growth of 2.9 percent. Seasonally adjusted data point to the fact that, compared to the previous quarter, GDP remained unchanged in October 2019, i.e. the expected change rate amounted to 0.0 percent. A more accurate real GDP growth assessment in the final quarter of 2019 will be possible when data for November and December become available.

* 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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