CEIZ index for November 2017: GDP growth rate of 3 percent in 2017, with economic activity decreasing at the end of the year

In November 2017, the CEIZ index fell by 0.24 points compared to the previous month. This is the fourth decrease in index value in a row since July 2017, when the index reached its peak in 2017. Such values suggest that in the fourth quarter of 2017, economic activity slowed down compared to the second and third quarter. Based on the index values available for two out of three months of the fourth quarter of 2017, we can conclude that in the fourth quarter the Croatian economy added only 0.1 percent to the third quarter GDP, which is the lowest quarterly GDP growth rate in 2017. On an annual level, the index indicates that in the fourth quarter GDP grew by 2.9 percent when compared to the same period in 2016, which is lower than the equivalent GDP growth rate recorded in the second and third quarter of 2017. The index values also suggest that the total real GDP growth in 2017 will amount to 3 percent, but due to weakened economic activity in the third and particularly in the fourth quarter of 2017, it is questionable whether the growth achieved in 2017 can be upheld in 2018. It should be noted that the estimation of GDP growth in the fourth quarter of 2017 is based only on the index values for October and November 2017, so its interpretation should be taken with caution. After the index values for December become available, the GDP growth for the quarter can be projected with greater certainty.

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, or rather, recession.

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