It’s not just Taylor Swift fans who are keeping a close eye on her Eras tour dates. One of Europe’s most prominent economists is well aware that the singer spends the summer flying between European stadiums.
Philip Lane, the European Central Bank’s chief economist, had the pop star in mind when he spoke at an event on Monday. The interviewer asked him about the risk of an intensification of stubborn inflation in the services sector, especially as a particularly busy summer approaches in Europe with the Paris Olympics and Euro 2024 in football in Germany.
“Well, that’s very interesting,” he said at the event. “You managed to say all that without saying Taylor Swift.”
Ms. Swift is touring Europe this summer, bringing in her wake hundreds of thousands of Swifties spending on plane tickets, hotels, restaurants and friendship bracelets. On Friday, she will perform the first of eight shows at Wembley Stadium in London; around 700,000 people are expected to see the shows in the British capital. And analysts debate the economic footprint it will leave.
American economists know that Eras is an economic tour de force. As consumers splurged on concerts, meals, vacations and other recreational experiences they missed during pandemic lockdowns, one company estimated the tour could generate $4.6 billion in North America alone from to spending on tickets, merchandise and travel.
Central bankers are right to examine the potential inflationary effects of the arrival of a global superstar: in May last year, when Beyonce kicked off her Renaissance world tour in Stockholm, an economist blamed a glitch in inflation data on the singer’s concert, as fans came from far and wide to attend the first show.
European central banks have started to lower interest rates – Or are ready to – as inflation has slowed significantly over the past year, bringing their 2 percent rate target within sight. But concerns remain that inflationary pressures have not been eradicated because price increases for services, which include hotels and restaurants, are consistently higher than expected.
The demand created by Eras Tour for hotel rooms and flights across Europe could drive up prices, fueling each country’s inflation rate. Central bankers are sensitive to even small changes in the data as they try to distinguish one-off from long-lasting effects. If central bankers fear that inflation will slow as expected, they could hold off on cutting rates.
“All these little quirks are going to matter a lot,” said Lucas Krishan, a strategist at TD Securities in London. They can “muddy the waters for central banks before making these decisions”.
Last month, Portugal’s inflation rate accelerated, partly due to a rise in hotel prices in Lisbon “resulting from a major cultural event”, the country’s statistics office said. Ms. Swift performed in Lisbon on May 24 and 25.
The impact of events such as Ms. Swift’s tour on inflation can be mitigated by the ability of a country’s economists to anticipate the effect of her concerts so that investors and others are not surprised by the data . European Central Bank policymakers said the return to 2% inflation would be “bumpy” and that a relatively strong tourism season was already factored into their forecasts.
But Mr Krishan said it was possible that Ms Swift’s concerts in August, when the tour returns to London, could increase service inflation in Britain, particularly because one of the dates of her tour could coincide with the day the national statistics agency records prices. data. If hotel prices follow the pattern established when she played Liverpool this month, services inflation could rise by as much as 0.3 percentage points. Higher-than-expected inflation data in August could encourage Bank of England officials not to cut rates in September, Krishan said.
Other analysts are skeptical that Ms. Swift will have a seismic impact that is reflected in national statistics.
“Taylor Swift is unlikely to influence central bank policy. It is unlikely to influence government policy,” said George Moran, an economist at Nomura. “And I don’t think it’s a sustainable option for the growth of a country to rely on superstar concerts.”
Barclays predicted Ms Swift’s tour would lead to a rise of almost a billion pounds ($1.3 billion) in the British economy, but these suggestions are difficult to justify, Mr. Moran said, because no one knows the extent to which people divert their spending from other activities. Even then, £1 billion would not be enough to Revitalizing Britain’s stagnant economy.
Mr. Moran nevertheless added that for certain cities and certain sectors, the tour could have a significant impact. When tickets went on sale last summer, Airbnb searches in host cities increased by more than 300% on average, the company said. Greater London authorities estimated that Ms Swift’s eight London shows generate £300 million for the economy.
“The impact will be more local than macro,” Mr Moran said. “Taylor Swift is obviously a massive phenomenon, and the areas she visits are generating great buzz in the hospitality industry.”
