Business activity showed a modest pick-up in Dublin during the final quarter of last year, but the economy in the capital is still being held back by the housing crisis, according to the latest Dublin Economic Monitor.
The monitor, which was published on Friday, is produced by EY-DKM Economic Advisory on behalf of the four Dublin local authorities.
Receding global trade tensions and temporary clarity over Brexit helped manufacturing return to expansionary territory for the first time since the final quarter of 2018, while services output accelerated.
This saw the overall IHS Markit Purchasing Managers Index (PMI) rise to 53.7. This contrasts with the rest of Ireland where the index fell below 50 for the first time since the third quarter of 2013. The 50 mark separates growth from contraction.
Brexit uncertainty was still apparent in Dublin Port in the third quarter of 2019, with throughput seeing its second consecutive quarter on quarter decline.
“This is one to watch in the coming quarters as negotiations surrounding the future trading relationship between the EU and the UK will likely see continued volatility in imports and exports,” said the monitor.
IHS Markit associate director Andrew Harker said the pick-up in output growth in the final quarter of 2019 “provides some optimism that firms in Dublin will see further improvements in momentum in early-2020” as Brexit uncertainty lifts for now.
“While the rest of Ireland saw output dip into contraction, any reinvigoration of growth in the capital should help the rest of the country head back into expansion mode,” he added.
Economist Ciara Morley said housing was a key issue holding back the economy. “Unemployment is now at its lowest level in almost 15 years and the workforce is at an all-time high,” she said.
“There is little doubt, however, that this success has brought with it its own challenges and Dublin is now facing several issues that are impacting its international competitiveness.
“Our analysis shows, for example, that the challenges in the housing market – where average residential rents have increased in Dublin by 6.7 per cent year on year are causing a drag on Dublin’s position in rankings focused on the quality and cost of living.
“Policies to boost housing supply, and thus affordability, in the city should go some way to improving the quality and cost of living for residents and expatriates alike.”
The Mastercard SpendingPulse, published as part of the monitor, showed that despite weakness in spending on discretionary goods, Dublin retail sales growth was solid in the quarter.
Tourist spending growth continued to ease with spending across Ireland up 4 per cent year-on-year and up 3.7 per cent year-on-year in Dublin – both were in double digit territory throughout 2018.
Mastercard SpendingPulse global head Michael McNamara, said: “While the growth rates may appear more modest on the surface, when taken in context with the spending surge in 2018, the growth in the fourth quarter was solid.
“As the economy in the USA remains on solid footing, it is reasonable to expect more positive tourist spending as we enter 2020.”
