In this issue PAGE 12 HOW SMART CITY TECHNOLOGIES ARE SUPPORTING DUBLIN S COMPETITIVENESS

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1 issue 12 february 2018 In this issue LATEST DUBLIN ECONOMIC DATA IHS MARKIT DUBLIN PMI KBC/ESRI CONSUMER SENTIMENT MASTERCARD SPENDINGPULSE DUBLIN S ECONOMY MAINTAINS MOMENTUM BUT HOUSING CHALLENGES PERSIST PAGE 12 HOW SMART CITY TECHNOLOGIES ARE SUPPORTING DUBLIN S COMPETITIVENESS By Jamie Cudden, Smart City Programme Manager, City Council. PAGE 14 DUBLIN'S HOTEL PERFORMANCE TO REMAIN STRONG THROUGH 2018 Sarah Duignan, Director of Client Relationships, STR Economic Monitor - JAN 2018.indd 1 31/01/ :54

2 WELCOME HIGHLIGHTS 's unemployment rate continued to decline in Q to reach 6.1%. Residential rents in gathered pace in Q to exceed an average of 1,500 per month. Residential property prices recorded YoY growth of more than 10% for a fifth consecutive month in October Public transport trips increased at an exceptional rate of 5 million passenger journeys or 10.1% YoY in Q to stand close to 55 million trips. Passenger arrivals at Airport reached a new monthly peak of 1.24 million arrivals in September Housing completions in strengthened to 620 in November 2017 but commencements have followed a more inconsistent pattern in recent months. Mastercard SpendingPulse Retail spending in recorded strong increases in Q with particularly robust YoY growth in household goods expenditure, while the US market was vital to growth in total spending by tourists. The MARKIT PMI PMI data increased at a robust and accelerated pace in Q4 2017, completing another strong year for the private sector. KBC/ESRI Consumer Sentiment Consumer sentiment in fell back in Q as a minor reversal in attitudes towards personal financial situations and lower confidence with respect to making major household purchases were recorded. image: grafton street, 2018 conor mccabe photography Welcome to the February 2018 issue of the Economic Monitor The Economic Monitor is a joint initiative on behalf of the four Local Authorities, and is designed to be of particular interest to those living and doing business in or considering locating here. It is produced by EY-DKM Economic Advisory Services, with KBC/ESRI delivering the Consumer Sentiment data and IHS MARKIT delivering the Purchasing Managers' Index (PMI). We are delighted to launch a new partnership with Mastercard to use their SpendingPulse reports to better understand retail spending and tourism expenditure patterns patterns. The spending pulse is derived from anonymized and aggregated card transaction data as well as other means of payments such as cash and City Council South County Council cheques. This data will help the city develop new insights on the spending patterns of ers and tourists, as well as comparing the Capital's performance to the whole of Ireland (see centrefold supplement). The special articles this quarter include a feature from Jamie Cudden, Smart City Programme Manager, City Council on how Smart City technologies are supporting city competitiveness (p.12). Sarah Duignan, Director of Client Relationships, STR assesses the hotel market and its growth potential for 2018 (p.14). We hope you find the Monitor useful and welcome any feedback. You can sign up to our quarterly mailing list and access the Monitor online at www. dublineconomy.ie. The next release will be published online on 3rd May Fingal County Council Dún Laoghaire Rathdown County Council This document provides general information on the economy. It is not intended to be used as a basis for any particular course of action or as a substitute for financial advice. The document is produced independently by EY-DKM Economic Advisory Services; the views and opinions expressed are those of the relevant author, and do not necessarily reflect the views of the Local Authorities. The Local Authorities disclaim all liability in connection with any action that may be taken in reliance of this document, and for any error, deficiency, flaw or omission contained in it. 2 // Economic Monitor - JAN 2018.indd 2 31/01/ :54

3 ECONOMY GLOBAL ECONOMY Global growth in 2017 was more robust than expected, reaching 3.7% on the back of strengthening economic performances in Europe and Asia in particular. This momentum is forecasted to be maintained into 2018 with growth projected to rise to 3.9%. In recent months the US economy has posted strong economic results and activity is expected to be further stimulated by a new package of tax measures. Temporary tax allowances for investment and corporate income tax reductions were approved in December 2017, and are likely to encourage investment in the economy over the short- to medium-terms. Projected growth rates for 2018 and 2019 have thus been revised upwards to 2.7% and 2.5% respectively. The Eurozone s economy performed better than expected in 2017, recording growth of 2.4%. Both domestic and external demand increased for many States in the monetary union and drove robust economic expansions, notably in Germany, Italy and The Netherlands. euro: sterling exchange rate 1.35 NATIONAL ECONOMY The Quarterly National Accounts for Q showed exceptionally strong levels of growth in the Irish economy with GDP expanding by 10.4% YoY. This stronger than expected growth was affected by the presence of large multinationals in Ireland, but was also driven by a number of domestic factors. Personal consumption is an important barometer of the health of the domestic economy and showed a robust rate of growth of 2.8% YoY in Q Goods purchases expanded at the sharpest rate with the CSO reporting that medical goods and appliances performed particularly strongly, and the latter is considered a significant development given that it underlines the willingness of consumers to undertake big ticket purchases. On a sectoral basis, the information & communication sector was the strongest performer YoY with growth of over 12% in Q3. The Manufacturing sector, which is by some distance the largest sector in the State, also recorded robust growth with a YoY expansion of close to 9%. exchequer tax receipts performance against profile, 2017 ( million) % Conservative Party Conference General Election Result % +16.4% % -1.0% Apr 16 May 16 Jun 16 Brexit Referendum Result Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Article 50 Triggered Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan % Total Income Tax VAT Corporation Tax -9.8% Stamp Duties Capital Gains Excise Duties source: central bank of ireland. Consumer pressures, government spending constraints and muted investment levels continue to affect the UK economy. Growth in 2017 reached 1.7% but is projected to fall back to 1.5% in 2018 and 2019 despite global economy momentum. The Bank of England raised its interest rates for the first time in a decade in November The increase was not prompted by the traditional case of strong projected growth, but by reducing slack in the economy and above target inflation which has resulted from the depreciation of sterling. major economies gdp growth forecasts 2017 % E 2018 % f 2019 % f global uk us euro area germany japan china india source: department of finance. Despite stronger than expected economic growth in the first three quarters of 2017, Exchequer tax returns for the full year were broadly in line with estimates. The greatest outperformance arose in Corporation Tax (see chart) where receipts exceeded profile by 486 million or 6.3%. Income tax surprisingly came in 236 million or 1.2% below profile, but the overall tax take was 116 million ahead of estimates and contributed to an Exchequer surplus in the year of over 1.9 billion. irish macroeconomic growth forecasts 2017 % E 2018 % f 2019 % f gnp gdp private consumption public expenditure investment exports imports unemployment rate cpi inflation N/A debt:gdp ratio* source: imf, january sources: 2017 & 2018 esri qec winter : department of finance, budget 2018 *general government balance. source: budget // 3 Economic Monitor - JAN 2018.indd 3 31/01/ :54

4 DUBLIN ECONOMY DUBLIN S ECONOMY MAINTAINS MOMENTUM BUT HOUSING CHALLENGES PERSIST unemployment continues to decline but housing supply and affordability remain problematic 's labour market recorded further significant gains in Q as the seasonally adjusted unemployment rate fell by 1.6 percentage points (pp) YoY to 6.1%. The private services sector has been vital to employment growth over the past 12 months with almost 12,000 jobs created in the sector YoY. The wholesale & retail trade and information & communication sectors have been integral to this services sector employment growth, accounting for a combined total of over 11,500 additional jobs YoY. The rising number of individuals at work in is likely to have contributed to rising housing costs as supply has not kept pace with the demands of a recovering economy. According to the RTB, average rents for residential properties in gathered further momentum in Q to exceed 1,500 per month for the first time since the series began in Similar increases have been recorded for property prices in with double-digit YoY price growth recorded in each month between June and October Housing completions have expanded over the past year but continued increases will be necessary to close the gap with demand. While considerable challenges exist in areas such as housing, other sectors of the Capital's economy are thriving. Tourism has provided significant impetus for growth in the Capital over the past number of years and indicators for the sector remain highly positive. Airport continues to reach new peaks in passenger arrivals with over 1.24 million people arriving in September 2017 alone, while the hotel market in has recorded rising occupancy and average daily rates on foot of robust demand. Despite robust gains across the first three quarters of 2017, 's consumer sentiment index fell back in Q4 according to KBC/ESRI. Austin Hughes, Chief Economist at KBC Bank Ireland, explains: "The pull-back in consumer sentiment in late 2017 is partly a correction of the very strong gains seen in the previous quarter. More fundamentally, it highlights the uneven nature of the current recovery and continuing uncertainties about what it might mean for consumers' own financial circumstances. Although the survey is pointing to clear improvements in areas such as new jobs in the Capital, this hasn't translated into the scale of gains in living standards for many households that may have been expected. So, the survey suggests that while consumers remain generally positive about economic conditions in the Capital, they remain fairly cautious about what this might mean for them personally." This weakness in consumer sentiment is a factor which may act to restrict the growth of consumer spending in 2018, according to Michael McNamara Global Head of SpendingPulse, Mastercard. The new Mastercard SpendingPulse recorded a strong final quarter of 2017, and Mr Lalor commented on this: "Retail sales finished the year on a steady footing. While Black Friday cannibalised Christmas sales, overall the last quarter of the year posted a strong growth rate. The fundamentals of the Irish economy are strong with robustness in both output and the labour market, and this will support the retail sector in However, the softness in consumer confidence and mild increases in inflation may put pressure on household discretionary spending." 's IHS Markit Purchasing Managers' Index (PMI) recorded continued increases in business activity in Q Andrew Harker, Associate Director at IHS Markit, notes: "A strong fourth quarter completed another positive year for the private sector, with a further sharp expansion of output recorded. Firms raised activity on the back of continued inflows of new work. As workloads increased further, extra staff were again hired at a rapid pace. Further encouragement is provided by the broad-based nature of the latest improvements - manufacturing and services saw output growth accelerate, while construction again posted the fastest overall increase. While rates of expansion in were generally stronger than seen across the Rest of Ireland, increases were still marked outside the Capital. With improvements in economic conditions across the Irish economy, the stage looks set for further growth in as 2018 gets under way." 4 // Economic Monitor - JAN 2018.indd 4 31/01/ :54

5 DUBLIN ECONOMIC INDICATORS DUBLIN ECONOMIC INDICATORS further steep decline in dublin's unemployment rate q3 '17 dublin unemployment (sa) 6.1% year on year change % points (sa) -1.6 dublin employment '000s (sa) year on year change '000s (sa) +5.8 source: cso lfs. dublin seasonally adjusted by EY-DKM. dublin & national unemployment rate % (sa) 18% National Max 15.9% 16% Max 14.2% 14% 12% 10% 8% 's seasonally adjusted unemployment rate continued to decline in Q3 2017, reducing by 0.4 percentage points (pp) QoQ and 1.6pp YoY to stand at 6.1%. This was the lowest rate recorded in the Capital since mid-2008 and reflected a strengthening labour market where over 662,000 people were employed in the quarter. At the national level, the unemployment rate remained stable at 6.7% in Q following QoQ declines in each of the previous 13 consecutive quarters. 6% 4% 2% 0% Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 National Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 source: cso lfs. dublin seasonally adjusted by EY-DKM. note: this series has been re-calibrated since the last issue industrial sector weighs down rate of employment growth q3 '17 services employment '000s (sa) year on year change '000s (sa) industry & constr, employment '000s (sa) 76.4 year on year change '000s (sa) -7.2 source: cso lfs, seasonally adjusted by EY-DKM employment by broad sector '000s (sa) Max: 653,500 Employment levels in continued to increase YoY in Q The private services sector recorded the strongest seasonally adjusted YoY growth of 2.9% and was supported by employment increases of 1.8% YoY in the public sector. Quite surprisingly the construction sector, which had been a key driver for the Capital's labour market, experienced a minor reduction in employment of 1.1% YoY. The greatest contraction in employment was recorded in the industrial sector where the number employed fell by 13.8% YoY, though this is likely related to recent changes in statistical methodologies Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3 14 Q3 15 Q3 16 Q3 17 Private Sector Services Public Sector Industry Construction source: cso lfs seasonally adjusted note: individual sector values may not sum to total due to rounding this series has been re-calibrated since the last issue // 5 Economic Monitor - JAN 2018.indd 5 31/01/ :54

6 DUBLIN ECONOMIC INDICATORS property prices maintain strong upward momentum oct '17 property price index dublin year on year % change property price index national excl dublin 91.0 year on year % change source: cso. note: this index includes both cash- and mortgage-based transactions. Residential property prices in continued to increase at double digit YoY rates between August and October The index for prices in the Capital exceeded 100 in September for the first time since early 2009 as ongoing supply constraints and increased buying power affected the market. Even stronger rates of property price growth have been recorded outside over the past year, with prices increasing by close to 13% YoY in October 2017 alone. residential property price index (2005 = 100) 130 Max Jun 08 Feb 09 Oct 09 Jun 10 Feb 11 Oct 11 Jun 12 Feb 13 Oct 13 Jun 14 Feb 15 Oct 15 Jun 16 Feb 17 Oct 17 National Excl source: cso. capital's average residential rents break 1,500 mark q3 '17 dublin avg residential rent per month 1,518 year on year change +136 source: rtb. 1,550 1,450 1,350 1,250 1,150 residential rents per month Max: 1,518 Average rents for residential properties in gathered pace in Q to reach a new peak and exceed 1,500 per month for the first time since the series began in The average rent for a property in the Capital in the quarter was 1,518 per month which was 136 or 9.8% above the equivalent rent in Q Average rents in the other counties within the GDA increased by 6.5% YoY, but a stronger growth rate of 9.2% was recorded across the rest of the country. Average rents in in Q3 were 87% higher than those recorded outside the GDA. 1, Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Greater Area (ex ) Outside GDA Q3 17 source: rtb. note: gda (ex dublin) is kildare, meath and wicklow. housing completions expand, but commencements inconsistent nov '17 total house commencements (sa) 578 year on year change +81 total house completions (sa) 620 year on year change +211 source: dhplg. seasonally adjusted by EY-DKM. An uneven trend in housing commencements has emerged in the residential market in recent months, with expansions in certain months followed by contractions in others. November 2017 is a prime example as commencements (seasonally adjusted) in the Capital increased by 16% YoY but fell by 15% MoM. Completions have shown a more consistent upward trend, rising by 52% YoY and close to 8% MoM to stand at 620 in November, and will be expected to increase further over the coming months. dublin housing commencements & completions (sa) 2,000 1,800 1,600 1,400 1,200 1, Nov 07 Jul 08 Mar 09 Completions Max: 1,750 Nov 09 Jul 10 Mar 11 Nov 11 Completions Jul 12 Commencements Max: 870 source: dhplg. seasonally adjusted by EY-DKM. note: Note: Completions data has been adjusted to accommodate a 2014 change in the method of data collection Mar 13 Nov 13 Jul 14 Mar 15 Commencements Nov 15 Jul 16 Mar 17 Nov 17 6 // Economic Monitor - JAN 2018.indd 6 31/01/ :54

7 DUBLIN ECONOMIC INDICATORS office rents increase across dublin in q q4 '17 city centre office rent index year on year % change +8.5 south suburbs office rent index year on year % change +3.6 source: CBRE dublin office rents index (2006 = 100) City Centre Max = South Suburbs Max = 114 Following a period of relative stability, office rents returned to strong levels of growth across in Q In the city centre, rents rose by 8.5% YoY to reach a new peak of over 118 on the index. The south suburbs recorded a less significant increase in rents of 3.6% YoY but also reached a new peak of 114 on the index. This was the first change in office rents recorded in the south suburbs in almost three years. Rents in the north and west suburbs are generally lower in absolute terms, but also recorded considerable levels of growth in Q Q4 07 Q2 08 Q2 09 source: cbre. Q2 10 Q2 11 Q2 12 City Centre Q2 13 Q2 14 Q2 15 South Suburbs Q2 16 Q2 17 marginal decline in office vacancy rates in q q4 '17 vacancy rate % dublin 2/4 5.7 year on year change % points +1.0 vacancy rate % dublin suburbs 7.6 year on year change % points -2.2 source: cbre. 30% 25% 20% 15% dublin office space vacancy rates % Suburbs Max = 25% 2/4 Max = 20.6% 's overall office vacancy rate fell marginally from 6.2% in Q to 6.1% in Q4. In the 2/4 postcodes, the vacancy rate was broadly stable QoQ but increased by 1 percentage point (pp) YoY from a low base to stand at 5.7%. Computers, hi-tech and business service providers accounted for the majority of take up in the two postcodes in the quarter. In the suburbs, vacancy rates continued on a downward trajectory in Q4 to stand at 7.6%, 2.2pp below the same quarter in % 5% 0% Q2 09 Q2 10 source: cbre. Q2 11 Q2 12 2/4 Q2 13 Q2 14 Q2 15 Suburbs Q2 16 Q2 17 exceptionally strong growth in public transport usage q3 '17 public transport million trips (sa) 54.8 year on year change million trips (sa) +5.0 source: nta seasonally adjusted by EY-DKM public transport million trips (sa) Passenger trips on the four services which make up 's public transport system expanded rapidly in Q Just under 55 million trips (seasonally adjusted) were undertaken in the quarter and this represented exceptionally strong growth of 10.1% YoY and 5% QoQ. Public transport usage has now increased YoY in every quarter for four years, with the most recent expansions primarily accounted for by the largest service provider, Bus Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17 source: nta. seasonally adjusted by EY-DKM. note: data includes dublin bus, bus eireann, luas & irish rail. // 7 Economic Monitor - JAN 2018.indd 7 31/01/ :54

8 DUBLIN ECONOMIC INDICATORS passenger arrivals at dublin airport continue to reach new peaks sep '17 total arrivals '000s (SA) 1,240.7 year on year change '000s (sa) ,250 1,150 1,050 dublin airport arrivals '000s (sa) Max: 1,241 source: cso, seasonally adjusted by EY-DKM. 950 Passenger arrivals at Airport maintained an upward trajectory in the third quarter of 2017 to reach a new peak of 1.24 million (seasonally adjusted) in September. Growth exceeded 6% YoY for a fourth consecutive month with passenger journeys increasing sharply on North American, Middle Eastern and North African routes in particular. This strong performance can be expected to have been sustained through the final quarter of the year with the airport reporting that each of the months of October, November and December were the strongest on record Severe Winter Weather 650 Icelandic Ash Cloud 550 Jul 08 May 09 Mar 10 Jan 11 Nov 11 Sep 12 Jul 13 source: cso. seasonally adjusted by EY-DKM. May 14 Mar 15 Jan 16 Nov 16 Sep 17 record throughput at dublin port in 2017 q4 '17 dublin port exports million tonnes (sa) 3.56 yoy change million tonnes (sa) dublin port imports million tonnes (sa) 5.36 yoy change million tonnes (sa) dublin port tonnage million tonnes (sa) Max: 9.3 million tonnes Source: Port. Seasonally Adjusted by EY-DKM. Note: imports and exports may not add to total throughput due to seasonal adjustment and rounding. 7.0 Following a peak in Q3 2017, the total cargo handled at Port remained broadly stable in the final quarter of the year. Over 9.2 million tonnes of cargo (seasonally adjusted) were handled in Q4. This represented a YoY increase of just under 400,000 tonnes or 4.1%. The Port reported record results for the full year of 2017, with the total cargo handled increasing by close to 1.5 million tonnes or 4.3%. Imports and exports both contributed substantially to this growth. 6.5 Min: 6.4 million tonnes Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 source: dublin port. seasonally adjusted by EY-DKM. Q2 15 Q2 16 Q2 17 hotel rates close to peak levels but new supply due on stream 150 dublin hotel average daily rates (sa) dec '17 hotel occupancy rate % (sa) 83.5% year on year change %age point +1.2 index of hotel room supply (sa, 2011=100) 98.4 year on year change % 0.0% source: str. seasonally adjusted by EY-DKM Maximum: 137 Occupancy rates in hotels remained stable at close to 83.5% (seasonally adjusted) across Q This was marginally below the peak recorded in late 2015 and reflected a combination of soaring demand and weak supply in recent years. Supply was largely unchanged in Q4, but STR has reported that the rate of construction of hotel rooms relative to the size of the market in the Capital is the strongest in Europe at present. Average Daily Rates for rooms in were close to peak levels at over 136 at the end of 2017, representing a YoY increase of close to 4% Dec 14 Feb 15 Apr 15 Jun 15 Aug 15 Oct 15 Dec 15 Feb 16 Apr 16 Jun 16 source: str. seasonally adjusted by EY-DKM. Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17 Oct 17 Dec 17 8 // Economic Monitor - JAN 2018.indd 8 31/01/ :54

9 DUBLIN S INTERNATIONAL REPUTATION REMAINS STRONG DESPITE COST OF LIVING FACTORS DUBLIN S INTERNATIONAL RANKINGS Internationally published benchmarks are a useful means of measuring a city s performance relative to its peers, and recent indicators for confirm the city s strong showing across a range of dimensions (see table below). The benchmarks listed focus on a number of areas attractiveness for FDI, the real estate market, quality and cost of living, business environment, university quality, start-up environment and tourism. At the national level, Ireland was ranked as the 6th most competitive country in the world in 2017 by the Swiss business school, IMD. This was the country s highest ranking since 2000 and reflected strong labour productivity, national culture, flexibility and adaptability. Ireland also rated highly for attracting and retaining talent, its attitudes towards globalisation and the country s investment incentives. was ranked in 7th position out of 31 European cities for real estate investment by PwC/ULI in 2017, down three places on The rankings stated that: is settling into a new phase as a normalised, mature and safe market to invest in after years as an opportunistic investing story [...] The make-up of buyers is changing accordingly - less US private equity capital and much more institutional money, largely from Europe. The PwC/ULI report also highlighted that the Capital was universally recognised as a city likely to benefit from Brexit given that its skilled, English-speaking workforce will be attractive to international firms. The anticipated inward movement of firms is expected to add a number of years of demand to s commercial property market. s labour force was central to its ranking of 5th out of 20 European cities in a Colliers International Cities of Influence report, with the orientation of its economy and the skills, experience and English language proficiency of its workforce to the fore. The workforce will also have benefitted from changes in talent migration which, according to LinkedIn, have recently shown more professionals moving to the country than departing with net migration particularly strong from the UK. In tourism, was listed as one of 21 cities on the National Geographic Traveller s magazine '2018 Best of the World' destinations with the city described as "Europe s largest village". The city s reputation as a business destination will also have been enhanced by the Convention Centre being named the world s leading meetings and conference centre at the World Travel Awards in Despite strong performances in a number of rankings, was placed at 47th out of 51 global cities in the Expat City Ranking This low ranking was largely due to the accommodation situation in the city with almost nine out of 10 expats reporting that housing was unaffordable. In a related context almost half of expats reported that their financial circumstances were challenging in due to a high cost of living, though career opportunities and a welcoming populace were cited as important positive factors in the city. dublin's latest international rankings SOURCE BENCHMARK CRITERIA YEAR RANKING CHANGE FDI Intelligence Global Cities of the Future Socio-economic Global Financial Centres Index (GFCI) Business environment, financial sector development, infrastructure, human capital, reputational & general factors; online survey * tcd. change on previous publication of the relevant benchmark. an upward-pointing arrow denotes an improvement Knight Frank Global Cities Report Cost to businesses of employing 100 people PwC/ULI Emerging Trends in Real Estate Europe Real estate investment, development Knight Frank Global Residential Cities Index House price growth IMD World Competitiveness Yearbook Rankings Economic performance, government efficiency, (Ireland) business efficiency & infrastructure Mercer 2017 Cost of Living Survey Cost of consumer goods and services Mercer 2017 Quality of Living Survey Environmental/socio-economic QS World University Rankings University quality * PitchBook Top Universities for Venture Capital-backed Origin of companies which received a first entrepreneurs round of venture capital * - CBRE European Tech Ranking Tech clusters employment, growth and attractiveness credentials InterNations Expat City Ranking 2017 Quality of urban living, getting settled, urban work life, and finance & housing Colliers International Cities of Influence Economic size & orientation, talent pools, affordability and country risk // 9 Economic Monitor - JAN 2018.indd 9 31/01/ :54

10 KBC / ESRI CONSUMER SENTIMENT INDEX 2017 consumer sentiment recovers from 2016 tumble 180 Base 2003 = 100 sentiment overall consumer sentiment dublin National excl. dublin 160 q year on year change quarter on quarter change Following a major decline in late 2016, consumer sentiment in rebounded in Sentiment levels in the region generally converged closer to those recorded in the rest of Ireland in the year. On a YoY basis, ended 2017 with a strong 15.5 index point rise in Q4. However, the quarter also saw the index falter slightly, decreasing by 5.9 index points QoQ. This fall reflects a minor reversal in positive attitudes towards current and expected personal financial situations, as well as lower confidence with respect to making major household purchases Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 National excl. Q2 16 Q2 17 perceptions of current conditions decline in q Base 2003 = 100 current conditions current conditions dublin National excl. dublin 120 q year on year change quarter on quarter change The Index of Current Conditions fell by 5.1 index points QoQ in Q4 2017, thus expanding the differential between the indices for and the rest of Ireland. The main driver was a weakening purchasing climate (-7.7 index points QoQ), with consumers less inclined to make large household purchases. Less significant household purchases and self-perceived personal financial situations improved QoQ with increases of 11.4 and 12.1 index points respectively Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 National excl. Q2 16 Q2 17 consumer expectations weaken 230 Base 2003 = 100 expectations National consumer expectations dublin excl. dublin q year on year change quarter on quarter change There was a considerable weakening of consumers views on the Irish economy in Q (-6.8 index points QoQ), thus reversing the majority of gains made in the previous quarter. Recent uncertainties regarding Brexit negotiations are likely to have affected consumers' views relative to Q3. Outside, overall expectations remained stable, with consumers marginally more positive about their future personal finances, up 1.1 index points compared to s quarterly fall of 5.3 points Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 National excl. About The KBC/ESRI sentiment index is based on responses from consumers about general economic conditions and their household finances. A more detailed commentary is available at 10 // Economic Monitor - JAN 2018.indd 10 31/01/ :54

11 DUBLIN IHS MARKIT PMI growth of output in dublin accelerates in q = no change overall ihs markit pmi (sa) increasing rate of growth overall ihs markit pmi dublin national excl. dublin 60 q year on year change quarter on quarter change private sector output increased at a sharp and accelerated pace in the final quarter of 2017, completing another strong year for the local economy. The PMI rose to 58.9 in Q4 from 57.9 in Q3. The rise in activity in the Capital was faster than in the Rest of Ireland. Expansions were recorded across all three monitored sectors, led by construction. Both the manufacturing and services sectors posted faster increases than in the previous quarter Q4 01 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 increasing rate of contraction National excl. new orders in dublin rise faster than in rest of ireland 65 overall pmi new orders (sa) 50 = no change increasing rate of growth national new orders dublin excl. dublin q year on year change quarter on quarter change New orders continued to rise strongly in at the end of 2017, extending the current sequence of growth to 21 quarters. The rate of expansion was broadly unchanged for the second quarter running, remaining at a marked pace that was well above the series average. Growth among firms was again faster than in the Rest of Ireland, the seventh consecutive quarter in which this has been the case Q4 01 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 increasing rate of contraction National excl. employment continues to rise sharply national employment growth dublin excl. dublin q year on year change quarter on quarter change overall pmi employment growth (sa) 50 = no change increasing rate of growth firms increased employment for the twenty-first quarter in a row in Q in response to continued improvements in workloads. Staffing levels rose markedly in the Capital at the end of the year, albeit to a lesser extent than was seen in Q3. Job creation in outpaced the Rest of Ireland for the second successive quarter, but companies based outside still posted a solid increase in employment in Q Q4 01 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 increasing rate of contraction National excl. about The Purchasing Managers Index (PMI) series is produced by IHS Markit Economics, an independent research company that produces highly-regarded surveys of business conditions in nations around the world // 11 Economic Monitor - JAN 2018.indd 11 31/01/ :54

12 SPECIAL REPORT HOW SMART CITY TECHNOLOGIES ARE SUPPORTING DUBLIN S COMPETITIVENESS BY JAMIE CUDDEN SMART CITY PROGRAMME MANAGER, DUBLIN CITY COUNCIL Smart is an initiative of the four local authorities to engage with smart technology providers, researchers and citizens to solve city challenges and improve city life. Cities and governments around the world are aspiring to be Smart. While there is no clear definition of a smart city there are some common threads including a focus on the increased use of sensors and instruments that allow cities to be better monitored and managed in real time. A smart city is also considered as one whose economy is increasingly driven by technology inspired innovation and entrepreneurship that in turn will attract businesses and jobs, create efficiencies and raise the productivity and competitiveness of the public and private sectors. Smart cities also involve increased collaboration and engagement between the city authority, the academic and business sectors and, most importantly, citizens. The creation of a Smart regional structure in 2016 was initiated to ensure that can take full advantage of some of the big tech trends that are transforming how we live and work. These trends include Mobile, Cloud Computing, the Internet of Things (IOT), Big Data, Machine Learning and Artificial Intelligence. One of the main ideas is to turn our city challenges into opportunities for innovation, addressing areas such as traffic congestion and mobility, how we respond to extreme weather events, improving energy efficiency and environment performance for example. At the centre of this is also how we improve citizen engagement and drive more efficient service delivery. Creating new opportunities for start-ups and entrepreneurs Smart and Enterprise Ireland are collaborating in supporting entrepreneurs to solve city challenges and are delivering one of the largest smart city innovation programmes globally. This programme is being delivered through Enterprise Ireland s Small Business Innovation Research programme (SBIR). Over 2016 and 2017 we have launched four challenges with over 1 million funding committed to source solutions to help scale up cycling, address illegal dumping and better monitor flooding risk across. To date 23 companies have benefitted from funding of between 12,500 and 25,000 each as well as working alongside local authority teams to design and pilot their solutions across. We are supporting companies to build new products and services pushing the realms of innovation and generating new job opportunities. accelerating dublin's smart city ambition is making real progress on its Smart City journey. We have all the key ingredients in place to realise our potential world leading tech companies, a vibrant 'start up' ecosystem, universities and a proactive city. However a real challenge is ensuring that we can keep up with the pace of technology innovation with relevant and appropriate policies, supports and regulation. 12 // Economic Monitor - JAN 2018.indd 12 31/01/ :54

13 examples of how dublin is getting smarter A game changer was the delivery of real time passenger information (RTPI) for s public transport system, in particular on the capital s extensive bus network with this information now available on signage and also as a real-time data feed to your smartphone. 's Traffic Management Centre with its intelligent transport systems, adaptive traffic signalling, and public transport prioritisation as well as an extensive CCTV network (with over 200 networked cameras) helps to keep traffic moving across the city. dublindashboard.ie created by Maynooth University is one of the most comprehensive city dashboards providing access to thousands of interactive data visualisations. Phase two of the dashboard is underway and is supported through a 2 million research grant from Science Foundation Ireland. Croke Park (one of the largest stadiums in Europe) is one of the world's first carbon neutral stadiums and now the test bed for a suite of cutting edge Internet of Things (IoT) technologies working with companies such as Intel and Microsoft. In order to respond more effectively to flooding we now have a network of sensors monitoring river levels, rainfall and local weather conditions in real time. The city is collaborating with Intel and the CONNECT Research Centre for Future Networks in TCD to deploy experimental low cost rainfall sensors. Over 400 smart bins (Big Belly compactors) were deployed across Dún Laoghaire-Rathdown resulting in a significant increase in efficiencies. These bins not only collect and compact waste with real time monitoring, but also measure environmental variables and passing pedestrian numbers. // 13 Economic Monitor - JAN 2018.indd 13 31/01/ :54

14 SPECIAL REPORT 's hotel performance to remain strong through 2018 BY SARAH DUIGNAN DIRECTOR OF CLIENT RELATIONSHIPS, STR Over the course of 2017, Ireland s hotels performed really well with a 1.8% increase in occupancy to 78.3%, and a 6.6% increase in the Average Daily Rate (ADR) to In, occupancy growth was marginal, up 0.8%, but nevertheless the city maintains one of the highest actual occupancy levels among key European cities at 83%. ADR growth has been the main driver of performance in, up 6.9% to While s rate growth was a major story for 2017, it is still far from being one of Europe s most expensive hotel markets. To provide some context, London s ADR over 2017 was , Barcelona s , and Amsterdam s was to name but a few. Regional Ireland (Ireland excluding ) was the main driver of Ireland s overall occupancy performance this year, representing a strong pick up in performance, eclipsing s moderate occupancy growth. In terms of RevPAR (Revenue per available room) performance North-West Ireland experienced an 8% increase while Munster grew 11.9% for example. This compares to s 7.7% growth. The biggest challenge facing the Irish hotel market in the short term is Brexit uncertainty. UK tourism demand may weaken further as the British consumer faces higher inflation and economic uncertainties in Recent data from Mastercard s Regional Ireland (Ireland excluding ) was the main driver of Ireland s overall occupancy performance this year, representing a strong pick up in performance, eclipsing s moderate occupancy growth 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% irish hotel markets - occupancy, annual daily rate (adr), revenue per available room (revpar) Ireland Ireland Regional Cork Kerry Kilkenny ADR RevPAR Occupancy SpendingPulse shows that overseas tourist spend for Ireland was up 8.8% YoY in Q The leading growth area was US tourists with overall spend up 17.5% YoY, while UK spend was down 1.4% YoY. STR and forecast partner Tourism Economics predict that arrivals from the US should grow by 4.5% per year on average through 2021, with increases in arrivals also forecasted from other top source markets for Ireland, including Germany (+3.4% per year through 2021), and France (+3.3% per year through 2021). Looking ahead STR projects an ADR growth between 5.5% and 7.5% in for Occupancy is expected to increase by between 0.5% and 1.5%, coming in at an actual level between 82% and 84%. As a result, RevPAR growth should be somewhere between 3.0% and 5.2%, ensuring another strong performance for Leinster Regional Munster Regional North West Ireland Surroundings City Centre // Economic Monitor - JAN 2018.indd 14 31/01/ :54

15 ECONOMIC SCORECARD dublin: economic scorecard february 2018 Note: These "petrol gauge" charts present the performance of the particular indicator relative to a range of performances from most positive (green) to least positive (red). Each gauge presents the latest value compared to the peak value and the trough value over the last decade (except for public transport trips which cover the past five years). The Commercial Property gauges are red at the high and low extremes, in recognition of the undesirability of rents that are either too high or too low as well as vacancy rates. economy ihs markit business pmi q unemployment rate q kbc/esri consumer sentiment q month moving average (sa) airport arrivals sept 2017 % (sa) index (2003 = 100) (sa) transport seaport cargo q public transport trips q , ,241 1, 's/month (sa) average residential rents q million tonnes/quarter (sa) residential property residential property price index oct 2017 million trips/quarter (sa) housing completions nov ,200 1, ,100 1,090 1, , ,518 1, ,750 /month index 2005 = 100 units/month (sa) commercial property dublin city centre office rent q dublin 2/4 office vacancy rate q dublin suburbs office vacancy rate q /sq.m. % % sources: cso, except consumer sentiment kbc/esri; ihs markit; seaport cargo dublin port; public transport nta; residential rents rtb; commercial property cbre research // 15 Economic Monitor - JAN 2018.indd 15 31/01/ :54

16 OPEN, CONNECTED & ENGAGED Finalist of the World Smart Cities Awards Economic Monitor - JAN 2018.indd 16 31/01/ :54