The latest Dublin Economic Monitor (DEM) shows that economic activity in the capital continues to grow, but at slowing rates.
The Dublin S&P Global Purchasing Managers’ Index (PMI) continued to show growth in Q3 2023 but at a weakening pace. A PMI reading of 53.5 was recorded in the quarter, exceeding the 50 mark which separates growth from contraction. The rate of expansion was marginally weaker than that recorded in Q2 (54.9) but remained significantly stronger than the equivalent rate across the Rest of Ireland (50.5) in Q3. The construction sector continued to be the strongest performer in Dublin in the quarter, with a PMI reading of 57.3 indicating strong ongoing levels of activity. Slowing growth was recorded in the services sector (52.6), while manufacturing did see an improvement in activity levels with a reading of 49.4 – up markedly from 46.6 in Q2, yet still in contraction.
According to MasterCard data, the value of retail spending by consumers in the Dublin economy continued to expand in Q3 2023 for a tenth consecutive quarter, but at a marginally slower pace than in previous quarters. The latest MasterCard SpendingPulse™ shows an index peak of 149.7 was reached in the quarter as growth rates of 0.9% QoQ and 3.7% YoY (SA) were recorded. Entertainment spending (+11.3%) was central to the overall QoQ growth in Q3. The Dublin tourism market produced some mixed retail spending results in Q3. Overall spending grew by 2.5% QoQ, with strong growth rates in the Chinese (+27.6% QoQ) and UK (+10.9%) markets, but declining expenditure from the French (-22.8%) and German markets (-7.3%) were concerning.
Dublin’s unemployment rate remained broadly unchanged at 5.1% (SA) in the third quarter of 2023. Employment levels across the Dublin economy rose by 13,000 (+1.7%) YoY, but fell by 16,400 (-2.1%) QoQ. The greatest decline of 8,500 jobs or 1.8% (SA) arose in the private services sector where reductions were recorded in finance, insurance and real estate (-5,100) QoQ and wholesale and retail (-4,300) QoQ.
Foreign Direct Investment (FDI) into the Dublin economy declined by 33% QoQ in Q3 2023, remaining down by 63% YoY. Over $367 million (SA) was invested in the Capital in the quarter. While 1,703 new jobs (SA) were created, this was down by 18.6% when compared to Q3 2022. The number of FDI projects also receded by 21% YoY to 26 projects (SA) in the quarter. Despite this, FDI investment per capita in Dublin ($320, SA) compared favourably to other European cities in Q3.
Residential property prices in Dublin returned to growth in each of the four months up to and including September 2023. Prices in the Capital rose MoM by between 0.3% (June) and 0.7% (September) as momentum was regathered. Despite such growth, prices remained down by 2% YoY due to MoM declines between October 2022 and May 2023. Rising prices are somewhat surprising given that the European Central Bank hiked interest rates at ten consecutive meetings from July 2022 – thus impacting purchasers’ ability to borrow.
Commenting on the DEM’s findings, Andrew Webb, Chief Economist with Grant Thornton, said:
“The year is ending with the economy continuing to demonstrate hard won momentum, particularly in the labour market. A note of caution has emerged in recent data which serves as a reminder that momentum is difficult to maintain in the face of ongoing economic headwinds and a higher interest rate environment. Weakening growth in business activity indicators and consumer spending measures suggest that the start of 2024 could be challenging.”