T-SQL Merge Statement with Output Clause Performance Issues

I'm running a fairly complex T-SQL Merge statement which updates a slowly changing dimension from staging tables.

I'm noticing something weird in regards to performance.

When I run the query without an output clause, the query runs very quickly because there haven't been any changes in Staging since the last time I ran the query.

However, when I add the following:

OUTPUT $action, Inserted.*, Deleted.*

The performance is abysmal. This is strange because the returned result set is empty anyway.

Any ideas as to why the output clause is causing this?