CEIZ index for July 2019: Acceleration of GDP growth rate at the beginning of the third quarter

September 16, 2019

CEIZ index in July 2019 recorded an increase of 0.3 index points compared to the previous month, and an increase of 0.6 index points compared to July 2018. CEIZ index value in July was 0.2 index points higher than the average index value in the second quarter of 2019, suggesting a mild acceleration of economic activity in the country compared to the previous quarter. Seasonally adjusted figures show that, at the beginning of the third quarter compared to the second quarter, three out of four index components recorded growth. These are, in higher-to-lower order: state budget income from VAT revenues, industrial production and real growth in retail trade, while the number of tourist arrivals recorded a decline.

Based on CEIZ index trends, we expect real GDP annual growth rate in the third quarter of 2019 to amount to 3.2 percent*, which is a stronger growth compared to GDP growth rate of 2.4 percent achieved in the second quarter of 2019. Seasonally adjusted figures indicate that, compared to the previous quarter, GDP rose by 0.8 percent in the third quarter of 2019. However, we will be able to calculate GDP growth in the third quarter of 2019 with greater certainty when CEIZ index values for August and September 2019 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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