CEIZ index for May 2021: Sharp growth of quarterly GDP in the second quarter of 2021

In May 2021, CEIZ index rose by 11.0 index points compared to May 2020. At the same time, average value of the index for April and May 2021 (i.e., for the first two months of the second quarter) was as much as 15.2 index points higher compared to the same period last year, when the economy was, for its most part, closed due to the implementation of epidemiological measures. When observing index components in April and May 2021, compared to the same period in 2020, all four index components (state budget income from VAT revenues, volume of industrial production, real retail trade, and the number of tourist arrivals) registered a growth, with annual growth rates at between 15.6 percent (growth rate of industrial production) and 323.7 percent (growth rate of the number of tourist arrivals).

The described index movements suggest that the economic activity measured with quarterly GDP change rates in the second quarter of 2021 is sharply accelerating compared to the same period last year. Based on the index movements, it can be estimated that, in the second quarter of 2021, the Croatian economy will grow by 14.5 percent compared to the same quarter in 2020. Index movements suggest that quarterly GDP change rate in the second quarter will also be positive and should amount to 1.2 percent. It is important to note that we will be able to make conclusions about the business cycle in the second quarter of 2021 with greater certainty when CEIZ index value for June becomes 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.