Last week I found myself in a Dublin shopping center that I hadn’t set foot in since 2019. I wasn’t bargain hunting or spending the savings from the Covid lockdown era that we all should have somewhere.
actually walked through the place after using the parking lot. Relatively speaking, the place was empty. Some people were walking around and others were hanging out in cafes.
But when I looked into each store as I passed by, I couldn’t see anyone buying anything. How much money will these companies lose today, I wondered.
You have to pay rent, rising energy costs, tariffs, higher personnel costs and still somehow make a profit.
According to grocery retail analysts Kantar, rising prices could add €453 to the average annual grocery bill, a figure more than €100 more than forecast in early May. Throw in price hikes for energy, transportation, and other services, and a 3 percent wage increase for the average worker is long gone.
Some of the steepest price hikes we’ve seen are in staples like butter, eggs, bread and flour, which are non-negotiable for many households on the shopping list.
Inevitably, shoppers buy some items and cut other non-essential items. Takeaway groceries sales for Ireland fell 4.9 percent over the last 12-week period.
The fallout from Covid has thrown the Irish economy into a strange state of unreality. Looking at the economic headlines, our export companies continue to do well. Multinational companies, especially in the pharmaceutical, IT and food sectors, seem to be thriving.
But the reality of our post-Covid domestic economy is beginning to bite. How do you reconcile massive queues at Dublin Airport and fully booked hotels and restaurants with the fact that retail sales were flat in May?
The latest figures released on Tuesday showed the volume of retail sales last month was flat on a monthly basis and was up 0.3 percent from the same month last year, according to the latest figures from the Central Statistics Office.
This is in stark contrast to April, when retail volume rose 4.1 percent compared to March. They’re flipping the idea of a consumer-driven spending spree on its head as the first free summer since 2019 begins.
Yes, there are queues at Dublin Airport. The reason for this is a lack of staff. People who haven’t gotten away for two years were dying to travel and probably booked many of those flights before Vladimir Putin invaded Ukraine or inflation hit 8 percent.
Hotels are another indicator of anomalies. Some people are booked into hotels to attend social events or gatherings that they have not been able to attend for two years. Hotels are booked, but are not actually full due to a lack of staff.
There is still a lot of money in Ireland. Much of the extra billions poured into household savings during Covid are still there. But some people are holding on because of the great uncertainty surrounding what will happen in the next 12 months. Others plan to use it to help them cope with rising costs for more basic spending needs.
They say in economics that there is no cure for high prices except high prices. In other words, when prices go up, people spend less, and that in turn recalibrates prices. Unfortunately, this requires the destruction of demand. That can cost jobs.
Other worrying signs for the domestic economy abound. The European Central Bank has gone from near-denial about the threat of inflation to increased rhetoric about raising interest rates to address the problem.
For the ECB, inflation was something that would subside by mid-2022. Well, here we are, and ECB President Christine Lagarde vowed to go “as far as necessary” to tackle inflation, which will remain “undesirably high”. for some time”.
It was quite a reversal.
The problem with using interest rates to cool inflation is that the later you start, the more aggressive you have to be to make it work. And the ECB has been coming out of the blocs very slowly.
Ultimately, we have to ask ourselves where this is all leading. People can sit out higher prices if they can push through wage increases to offset at least some of the pain. But at what point does the domestic economic slowdown begin to bite in a way that impacts job growth.
Companies in sectors exposed to the domestic spending economy will certainly find it all too difficult. Many of the shops in the mall I walked through are small local businesses. After a while it won’t be worth staying open just to lose money.
Unless the general international economic situation deteriorates much, Ireland could technically avoid a recession. Although that’s starting to look a little less likely. But even if we avoided two consecutive quarters of decline in GDP, it will feel like a recession for so many people, and especially smaller companies.
The government faces few simple options. It’s already under pressure to do more on the cost of living ahead of October’s budget, as it can only stem the pain for some while worrying about how bad things could get.
Political opponents step into the open when it comes to inflation. They hardly have to say anything while government ministers figure out what they can afford and how they can maximize PR success by doing it.
Perhaps now is the right time to really reconsider the strategic and economic value of multinational investments. With the possibility of a flattening domestic economy and tremendous uncertainty, imagine where we would be without these top-notch, high-paying jobs and tax revenue.
https://www.independent.ie/business/irish/even-if-we-dont-hit-a-recession-for-many-it-is-going-to-feel-like-one-41802603.html Even if we don’t hit a recession, it will feel like one for many