CEIZ index for January 2019: Slight acceleration of annual GDP growth rate at the beginning of 2019

In January 2019, CEIZ index grew by 0.12 index points compared to December 2018 and was 0.10 index points higher than the average index value recorded in the last quarter of 2018. This suggests that the economic activity in the country strengthened slightly at the beginning of 2019 compared to the last quarter of 2018, which was marked by a slowdown of economic activity. However, considering that the index value in the first month of 2019 was lower than in January of 2018, we can conclude that the strengthening of economic activity at the beginning of 2019 is of limited nature. CEIZ index trends indicate that the real annual GDP growth rate in the first quarter of 2019 could amount to 2.4 percent, which is just 0.1 percentage points higher than the 2.3 percent annual GDP growth rate recorded in the last quarter of 2018, but also 0.2 percentage points lower than the total GDP growth rate recorded in 2018. To confirm this GDP forecast for the first quarter of 2019 with greater certainty, we will have to wait for the CEIZ index values for February and March of 2019 to become available.

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.