The capital’s economy is beginning to show signs of stress, according to the latest Dublin Economic Monitor, suggesting a recession may be on the way.
That monitor is published by four local authorities in the capital and measures economic indicators including retail spending, business activity, employment, as well as property market and occupancy rates.
Data from Mastercard shows that retail spending in Dublin declined by 8.1 percent in the first quarter of 2022 compared to the last quarter of 2021. The most noticeable decline in consumer spending was in department stores and clothing stores where spending fell by more than a quarter.
Mastercard attributed the caution to the fall in spending due to rising cost of living and rising energy prices as a result of the war in Ukraine.
Meanwhile, the S&P Global Purchasing Managers’ Index for Dublin posted a strong and stable first quarter, as the Omicron wave eased. Construction was particularly strong, bringing the overall PMI to 60.1. Any result above 50 signifies growth. However, despite the uptick in demand, S&P warned that “intense cost pressures” are set to limit growth in the second quarter.
Dublin’s unemployment rate rose 0.4 percent from the fourth quarter of the year to 5.8 percent in Q1. Despite this, total employment among Dublin residents reached a record high of over 760,000 in the same period.
However, some industries were struggling to fill vacancies as summer approached. Vacancies were most common in facilities and retail in Dublin last month, according to Indiad, with cleaners, sales assistants and security officers in demand.
While the number of housing completions and property transactions also increased slightly in Q1, prices also increased. Dublin house prices rose 12.4 percent in the year to March 2021, reaching the highest recorded price since 2008.
Although residential rents declined at the end of the year, it was only the second decrease in six years. By the start of the year the average rent fell to 3.3 pc as renters entered the new year with the average rent for a property in Dublin now at €1,804.
For tourists visiting the capital, the demand for hotels was hot with occupancy rates at 82.9 pc in April. This marked the highest occupancy rate recorded in Dublin since the summer of 2019. With increasing numbers of overnight visitors, prices rose to the highest daily rate recorded since the Dublin Economic Monitor was launched eight years ago.
According to Andrew Webb, chief economist at Grant Thornton, an analysis of the data coming out of Dublin shows the likelihood of a recession is increasing.
“Cost of living pressure is pushing consumer and business sentiment into more downbeat territory, which is reflected in Mastercard Spending Pulse data and a softening in new job listings. All eyes are now on consumers whether the downbeat sentiment translates into lower spending, indicating an economic slowdown,” he said.
