CEIZ index for July 2023: Economy stagnates at the beginning of the third quarter of 2023

September 22, 2023

In July 2023, the CEIZ index decreased by 0.09 index points compared to June 2023. At the same time, the index value increased by 0.3 index points compared to July 2022. When observing individual index components, a higher seasonally adjusted value in July 2023 compared to June 2023 was only recorded by state budget income from VAT revenues, while the number of tourist arrivals, the volume of industrial production, and real retail trade recorded a lower seasonally adjusted value.

The described index movements suggest that, compared to the third quarter of 2022, the economic activity in the third quarter of 2023, measured with annual GDP change rates, has continued to record a growth rate, which is estimated at 2.3 percent based on the index movements. At the same time, economic activity at the very beginning of the third quarter of 2023, compared to the second quarter of 2023, is displaying a stagnation trend. Based on the index movements, GDP is estimated to decrease by 0.01 percent in the third quarter of 2023 compared to the previous quarter. A more precise assessment of the business cycle movements in the third quarter of 2023 will be possible when the index values for August and September 2023 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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