Sharp drop in Dublin clothes shopping triggers recession alert

According to the latest Dublin Economic Monitor, the capital’s economy is showing signs of stress, suggesting a downturn could be imminent.

Published by the capital’s four local authorities, the monitor measures economic indicators including retail spending, business activity, employment, and the housing market and occupancy rates.

Data from Mastercard shows that retail spending in Dublin fell by 8.1 percent in the first quarter of 2022 compared to the last quarter of 2021. The most notable decline in consumer spending was in department and clothing stores, where spending fell by more than a quarter.

Mastercard attributed the drop in spending to caution due to rising cost of living and rising energy prices in the wake of the war in Ukraine.

Meanwhile, the S&P Global Purchasing Manager’s Index for Dublin posted a strong and resilient first quarter as the Omicron wave subsided. Construction was particularly strong, leading to an overall PMI reading of 60.1. Any result above 50 means growth. However, despite the acceleration in demand, S&P warned that “increasing cost pressures” are likely 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 the first quarter. Despite this, total employment among Dublin residents reached a record high of over 760,000 during the same period.

However, some industries struggled to fill vacancies as summer approached. Job vacancies in Dublin over the past month were most commonly found in the facilities and retail sectors, with cleaners, sales assistants and security guards in demand, according to Indeed.

The number of apartment completions and real estate transactions also rose slightly in Q1, and prices rose as well. Property prices in Dublin rose 12.4 per cent in the year to March 2021, hitting the highest price recorded since 2008.

However, residential rents fell towards the end of the year, although this was only the second decline in six years. The average rent fell 3.3% at the start of the year as tenants entered the new year and the average rent for a property in Dublin was now €1,804.

Hotels were in high demand among visitors to the capital, with occupancy rates of 82.9 percent in April. This was the highest occupancy rate recorded in Dublin since the summer of 2019. Alongside the rising number of overnight guests, prices rose to the highest daily rate recorded since the Dublin Economic Monitor began eight years ago.

According to Andrew Webb, Grant Thornton’s chief economist, analysis of Dublin data shows a recession is becoming increasingly likely.

“Pressures on the cost of living are pushing consumer and business sentiment into gloomier territory, as reflected in Mastercard SpendingPulse data and a slowdown in new job listings. All eyes are now on consumers to see if pessimistic sentiment translates into reduced spending and triggers an economic downturn,” he said.