CEIZ index for March 2021: Strong growth of quarterly GDP in the first quarter of 2021

In March 2021, CEIZ index increased in value by 4.6 index points compared to March 2020, while compared to the previous month, it recorded an increase of 3.5 index points. When observing the index components, compared to the previous month, three index components recorded a higher seasonally adjusted value in March: state budget income from VAT revenues, industrial production volume index, and retail trade. The number of tourist arrivals recorded a lower seasonally adjusted value in March, but increased compared to March 2020.

The described index movements suggest that the economic activity, measured with quarterly GDP change rates, strongly 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 movements, it can be estimated that the Croatian economy will grow by 3.3 percent in the first quarter of 2021 compared to the previous quarter. However, the annual GDP change rate in the first quarter of 2021 remains negative and amounts to -3.7 percent, which is significantly lower than the annual GDP drop recorded in the fourth quarter of 2020 (-7.0 percent). The negative annual GDP change rate in the first quarter of 2021 is partly the result of the partial economic lockdown in the first quarter of 2021, while in the first quarter of 2020 the economy recorded both an annual and quarterly growth, and epidemiological measures were not implemented until the very end of that quarter.

* 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.