It’s not just Taylor Swift fans who are keeping a close eye on the dates of her Eras tour. One of Europe’s most prominent economists knows full well that the singer spends the summer jetting back and forth 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 danger that stubborn inflation in the services sector could worsen, especially as Europe heads into a particularly busy summer with the Olympics in Paris and the 2024 European Football Championship 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 traveling across Europe this summer, bringing with her hundreds of thousands of Swifties who are spending on flights, hotels, restaurants and friendship bracelets. On Friday she will perform the first of eight shows at London’s Wembley Stadium; Around 700,000 people are expected to attend the show 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 masterpiece. As consumers splurged on concerts, meals, vacations and other leisure experiences they missed out on during pandemic lockdowns, one company estimated that the tour generated $4.6 billion in spending on tickets, merchandise and travel in North America alone could bring in.
Central bankers have the right to question the possible inflationary impact of the arrival of a global superstar: When Beyoncé kicked off her Renaissance world tour in Stockholm last May, an economist attributed a drop in inflation data to the singer’s concert, according to fans traveling from far away to attend the first show.
European central banks have begun cutting interest rates – or are poised to do so – as inflation has slowed significantly over the past year, putting their 2 percent interest rate target within reach. However, concerns remain that inflationary pressures have not been contained as price increases for services, which include hotels and restaurants, continue to be higher than expected.
The demand for hotel rooms and flights across Europe created by the Eras Tour could drive up prices, affecting each country’s inflation rate. Central bankers are sensitive to even the smallest changes in data as they try to distinguish one-time from lasting effects. If central bankers fear inflation is not slowing as expected, they might refrain from cutting interest rates.
“All of these little quirks are going to matter a lot,” said Lucas Krishan, a strategist at TD Securities in London. They can “confuse the picture for central banks ahead of these decisions.”
Portugal’s inflation rate accelerated last month, driven in part by a rise in hotel prices in Lisbon “which was driven by 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 impact of her concerts so that investors and others are not surprised by the data. Policymakers at the European Central Bank have said the road back to 2 percent inflation will be “bumpy” and that a relatively strong tourism season is already built into their forecasts.
But Mr Krishan said it was possible that Ms Swift’s concerts in August, when the tour passes through London, could increase services inflation in Britain, particularly because one of her tour dates could coincide with the day the country’s statistics agency Prices records data. If hotel prices follow the pattern seen in their performance in Liverpool this month, service sector inflation could rise by as much as 0.3 percentage points. Better-than-expected August inflation data could encourage Bank of England officials to hold off on rate cuts in September, Krishan said.
Other analysts are skeptical about Ms. Swift’s ability to have the seismic impact shown 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 relying on superstar concerts is a sustainable option for a country’s growth.”
Barclays predicted Ms. Swift’s trip would result in a nearly 1 billion pound ($1.3 billion) boost to the British economy, but those suggestions were difficult to substantiate, Moran said, because no one knew how many people redirect their spending from other activities. Even then, a billion pounds would not be enough to revive Britain’s stagnant economy.
Still, Mr Moran added that the tour could have a significant impact on individual cities and specific 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 would bring £300 million to the economy.
“The impact will be more local than macroeconomic,” Moran said. “Taylor Swift is obviously a massive phenomenon and the areas she visits are making a big splash in the hospitality industry.”
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2024-06-21 04:00:51
www.nytimes.com
