Several factors impacting Dublin’s economy in the first quarter of the year suggest that a recession is an increasingly realistic possibility, according to the latest Dublin Economic Monitor.
he monitor is published by the four local authorities in the capital and measures economic indicators including retail spending, business activity, employment, as well as the property market and occupancy rates.
Data from MasterCard illustrates that retail spending in Dublin dropped by 8.1pc in the first quarter of 2022 compared to the final quarter of 2021. The most noticeable drop in consumer spending was in department stores and clothes shop where spending plummeted by more than a quarter.
MasterCard attributed the spending decline to cautiousness due to rising cost of living and soaring energy prices arising from the war in Ukraine.
Meanwhile, the S&P Global Purchasing Manager’s Index for Dublin recorded a strong and steady first quarter as the Omicron wave subsided. Construction was particularly strong, driving an overall PMI reading of 60.1. Any result above 50 signifies growth. However, despite the acceleration in demand, S&P warned that “intensifying cost pressures” look set to limit growth in the second quarter.
Dublin’s unemployment rate grew by 0.4pc from the fourth quarter of the year to 5.8pc in Q1. Despite this, total employment among Dublin residents reached a record high of over 760,000 in the same period.
However, some industries struggled to fill empty positions as summer approached. Vacancies in Dublin last month were most common in the facilities and retail sectors, with cleaners, sales assistants and security officers in demand, according to Indeed.
The number of housing completions and property transactions also slightly in Q1, with prices also increasing. Dublin house prices rose 12.4pc in the year to March 2021 to reach the highest recorded price since 2008.
Residential rents declined however at the end of the year, although this was only the second decrease in six years. The average rent fell by 3.3pc by the beginning of the year as renters entered the new year with the average rent for a property in Dublin now standing at €1,804.
For visitors to the capital, hotels were in hot demand, with occupancy rates at 82.9pc in April. This marked the highest occupancy rate recorded in Dublin since summer 2019. Alongside the rising number of overnight visitors, prices rose to reach the highest daily rate recorded since the Dublin Economic Monitor began eight years ago.
According to Grant Thornton chief economist Andrew Webb, analysis of the data emerging from Dublin illustrates that a recession is becoming 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,” he said.