The latest Dublin Economic Monitor (DEM), published this morning by the four Dublin Local Authorities, shows that the leading indicators for the Capital’s economy hint that a recession is an increasingly realistic possibility.
According to data from MasterCard, Dublin retail spending fell in Q1 as a distinct softness in consumer demand affected specific categories within the sector. Cost of living pressures, linked to soaring energy prices due to the war in Ukraine, are likely to have been influential as spending in the Capital ultimately fell by 8.1% QoQ. The single most significant QoQ reduction in expenditure was in department and clothing stores where spending dropped by more than a quarter (-28.3%).
Dublin’s S&P Global Purchasing Managers’ Index (PMI) shows that business activity in the Capital’s private sector increased at a sharp and accelerated rate in Q1 2022 as the fading of the Omicron wave of Covid-19 boosted growth. Construction was to the fore with an index reading of 62.1, and drove an overall PMI reading of 60.1 (a reading above 50 signifies growth). Despite these expansions, S&P Global have warned of the potential for the Russian invasion of Ukraine, and intensifying cost pressures, to limit growth in Q2.
In the labour market, unemployment edged up by 0.4 percentage points QoQ to 5.8% (SA) in Q1, though total employment amongst the Capital’s residents reached a new peak of over 760,000 (SA) in the quarter. The jobs market remained broadly stable in the first five months of the year, and a new indicator from the jobs listings website, Indeed, shows that vacancies in May were most common in the facilities and retail sectors. Cleaners, sales assistants and security officers were in greatest demand in the month.
Activity in the residential property market continued to recover in Q1 of this year, with rising housing completions and transactions levels. Prices continued to rise in Dublin in Q1, increasing by 0.4% MoM and 12.4% YoY in March to reach a new peak index reading which was the highest since 2008. Residential rents in Dublin declined QoQ for only the second time in six years in Q4 2021. The average rent for a property in the Capital fell by 3.3% QoQ to stand at €1,804 in the quarter.
The Dublin hotel market roared back to life in the first four months of 2022. Occupancy rates in the sector, which had languished below 10% during the worst of the pandemic, rose in each month to stand at 82.9% (SA) in April. This was the highest occupancy rate since summer 2019. Average Daily Rates also rose dramatically to reach the highest level (€155, SA) since the series began in 2014.
“While forecasters are not yet calling a recession, there is a growing number of clues in the data to suggest a recession is increasingly likely. Cost of living pressures are pushing consumer and business sentiment into more downbeat territory, reflected in MasterCard SpendingPulse data and a softening of new job listings. All eyes are now on consumers to see if downbeat sentiment turns to reduced spending, prompting an economic downturn.”
ANDREW WEBB, CHIEF ECONOMIST AT GRANT THORNTON
The Dublin Economic Monitor is produced by Grant Thornton on behalf of the four Dublin Local Authorities to provide timely, reliable data and commentary on the economic landscape of the Dublin region. It covers 18 key indicators, consumer spending data from the MasterCard SpendingPulse™ and provides regular insights into different aspects of Dublin’s economy.
