CEIZ index for November 2019: Slowing down of economic activity in the final quarter of 2019

January 16, 2020

In November 2019, the value of CEIZ index mildly decreased by 0.05 index points compared to the same month in 2018, while compared to the previous month the index value decreased by 0.35 index points. Such index movement suggests that economic activity measured in annual change rates, in the last quarter of 2019, has significantly slowed down. CEIZ index also decreased in its average value in the first two months of the fourth quarter of 2019, compared to the previous quarter, by 0.51 index points. When looking at index components, volume of industrial production, number of tourist arrivals and state budget income from VAT revenues registered a lower seasonally adjusted value in November, compared to the previous month. The only component registering a growth of seasonally adjusted value is real index of turnover in retail trade.    

Based on CEIZ index movements, we expect the annual growth rate of real GDP in the fourth quarter of 2019, compared to the same period last year, to amount to 2.3 percent*, which is a lower GDP growth rate compared to the third quarter of 2019 when GDP registered a growth of 2.9 percent. Seasonally adjusted data, calculated on the basis of the annual GDP growth assessment in the fourth quarter of 2019, suggest that, compared to the third quarter, GDP could drop by 0.3 percent in the fourth quarter. A more accurate real GDP growth assessment in the final quarter of 2019 will be possible when data for 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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