The Taylor Swift economy has landed in Europe
It’s not just Taylor Swift fans who are keeping a close eye on her Eras Tour dates. One of Europe’s leading economists is well aware that the singer is spending the summer flying between European stadiums.
Philip Lane, chief economist at the European Central Bank, had the pop star in mind when he spoke at an event on Monday. The interviewer had asked him about the risk that persistent inflation in the services sector could increase, especially as Europe faces a particularly busy summer with the Olympic Games in Paris and the 2024 European Football Championship in Germany.
“Well, that’s very interesting,” he said at the event“You were able to say it all without mentioning Taylor Swift.”
Ms. Swift is touring Europe this summer, bringing with her hundreds of thousands of Swifties who are spending money 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 are debating the economic footprint it will leave behind.
Economists in the United States know that Eras is an economic tour de force. As consumers indulged in concerts, meals, vacations and other recreational experiences missed during pandemic lockdowns, one company estimated the tour could generate $4.6 billion in North America alone from spending on tickets, merchandise and travel .
Central bankers have the right to scrutinize the potential inflationary effects of the arrival of a global superstar: last May, when Beyoncé kicked off her Renaissance World Tour in Stockholm, an economist attributed an error in inflation figures to the singer’s concert, as fans traveled from afar to witness the first show.
Europe’s central banks have begun cutting interest rates — or are poised to do so — as inflation has slowed significantly over the past year, bringing their 2 percent target rate into view. But there are persistent concerns that inflationary pressures have not been dissipated as price increases for services, including hotels and restaurants, have repeatedly been higher than expected.
The demand the Eras Tour creates for hotel rooms and flights across Europe could push up prices, which could affect inflation in each country. Central bankers are sensitive to even tiny changes in the data as they try to distinguish one-time from lasting effects. If central bankers are concerned that inflation is not slowing as expected, they could delay a rate cut.
“All those little quirks are going to matter a lot,” said Lucas Krishan, a strategist at TD Securities in London. They can “cloud the picture for central banks on the way to these decisions.”
Inflation accelerated in Portugal last month, partly due to a rise in hotel prices in Lisbon “due to a major cultural event,” the country’s statistics office said. Ms. Swift performed in Lisbon on May 24 and 25.
The impact that events like Ms. Swift’s tour have on inflation can be mitigated by how well a country’s economists predict the effect of its concerts, so that investors and others are not surprised by the data. Policymakers at the European Central Bank have said the path back to 2 percent inflation will be “bumpy” and that a relatively strong tourist season is already baked into their forecasts.
But Mr Krishan said it was possible that Ms Swift’s concerts in August, when the London tour returns, could raise services inflation in Britain, especially as one of her tour dates could coincide with the day the National Statistics Office records price data. If hotel prices follow the pattern she did in 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 to delay a September rate cut, Mr Krishan said.
Other analysts are skeptical about Ms. Swift’s ability to have a seismic impact that would be reflected in national statistics.
“Taylor Swift is unlikely to influence central bank policy. She is unlikely to influence government policy,” said George Moran, an economist at Nomura. “And I don’t think it’s a sustainable option for a country’s growth to rely on superstar concerts.”
Barclays predicted that Ms. Swift’s tour would lead to a nearly £1 billion ($1.3 billion) increase in the UK economybut those suggestions are difficult to substantiate, said Mr. Moran, because no one knows how many people divert their spending from other activities. Even then, £1 billion would not be enough to revive Britain’s stagnant economy.
Still, Mr. Moran added that the tour could have a meaningful impact on individual cities and particular sectors. When tickets went on sale last summer, Airbnb searches in host cities increased by more than 300 percent on average, the company said. The Greater London Authority estimated that Ms. Swift’s eight London shows Generating £300 million for the economy.
“The impact will be local rather than macroeconomic,” Mr Moran said. “Taylor Swift is clearly a huge phenomenon, and the areas she visits are making waves in the hospitality industry.”
