CEIZ index for October 2021: Continued growth of annual GDP in the fourth quarter of 2021

December 20, 2021

In October 2021, CEIZ index rose by 4.84 index points compared to the same month in 2020. At the same time, compared to September 2021, the index value dropped by 0.74 index points. When observing individual index components, all four index components (state budget income from VAT revenues, volume of industrial production, real retail trade, and the number of tourist arrivals) recorded a higher value in October 2021 compared to October 2020. Seasonally adjusted value of index components parallelly dropped in October 2021, compared to September 2021, for all index components, suggesting a mild deceleration of economic activity in October compared to the previous month.

The described index movements suggest that economic activity measured with annual GDP change rates, in the fourth quarter of 2021, compared to the same quarter in 2020, has continued to record a double-digit growth rate as in the second and third quarters of 2021. At the same time, economic activity at the very beginning of the fourth quarter is indicating a mild deceleration trend compared to the third quarter of 2021. A more precise assessment of the business cycle in the fourth quarter of 2021 will be possible when the index values for November and December 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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