CEIZ index for February 2021: Mild growth of quarterly GDP at the beginning of the first quarter

In February 2021, CEIZ index decreased in value by 1.5 index points compared to February 2020, while compared to the previous month, it recorded a very mild decrease of 0.05 index points. When observing the index components, compared to the previous month, all index components (state budget income from VAT revenues, industrial production volume index, the number of tourist arrivals, and retail trade) recorded a higher seasonally adjusted value in February. Described index movements suggest that the economic activity, measured with quarterly GDP change rates, slightly accelerated in the first quarter of 2021 compared to the previous quarter, suggesting a continuation of gradual economic recovery, which started in the summer months. Based on the index value movements, it can be estimated that the Croatian economy will, in the first quarter of 2021, grow by 1.8 percent compared to the previous quarter. However, it can be expected that the annual GDP change rate in the first quarter of 2021 would remain negative, but of lower absolute value than the rate recorded in the fourth quarter of 2020 (-7.0 percent), due to the extended measures of partial economic lockdown, which has been in force since the end of November 2020.

* 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.