July 25, 2024

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How Taylor Swift’s Eras Tour could impact the European economy

How Taylor Swift’s Eras Tour could impact the European economy

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 fully aware that the singer spends the summer traveling between European stadiums.

Philip Lane, chief economist at the European Central Bank, was thinking about the pop star when he spoke at an event on Monday. The interviewer had asked him about the risk of stubborn inflation in the services sector getting worse, especially as Europe heads into 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. In the event. “I was able 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 London’s Wembley Stadium. About 700,000 people are expected to watch the shows in the British capital. Analysts are discussing the economic footprint it will leave.

Economists in the United States realize that the Era of Ages represents an economic tour de force. With consumers spending on concerts, meals, vacations and other entertainment experiences they 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 are justified in scrutinizing the potential inflationary effects of a global star’s arrival: In May last year, when Beyoncé kicked off her Renaissance World Tour in Stockholm, one economist attributed a glitch in inflation data to the singer’s concert, as did fans. He traveled from far away to witness the premiere.

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Central banks in Europe have begun to cut interest rates – or are preparing to do so – as inflation has slowed significantly over the past year, putting a target of 2 per cent in sight. But there are persistent concerns that inflationary pressures will not be eliminated as price gains for services, which include hotels and restaurants, are frequently higher than expected.

The demand that the Eras Tour creates for hotel rooms and flights across Europe can drive up prices that fuel each country’s inflation rate. Central bankers are sensitive to even minute changes in data as they try to distinguish between one-time and permanent effects. If central bankers are concerned that inflation is not slowing as expected, they can postpone cutting interest rates.

“All those little quirks are going to matter a lot,” said Lucas Krishan, a strategist at TD Securities in London. They can “distort the picture for central banks heading to these decisions.”

Last month, Portugal’s inflation rate accelerated, partly due to a jump in hotel prices in Lisbon “caused by a major cultural event,” the country’s statistics office said. Ms. Swift performed in Lisbon on May 24 and 25.

The impact of events like Swift’s tour on inflation can be mitigated by how well a country’s economists anticipate the impact of its concerts so that investors and others are not surprised by the data. ECB policymakers said the road back to 2% inflation would be “bumpy” and that a relatively strong tourist season was already included in their forecasts.

But Mr Krishan said it was possible that Swift’s concerts in August, when the tour returns via London, could further inflate services in Britain, especially as one of her tour dates may coincide with the day on which the national statistics agency records the price. Data. If hotel prices follow the pattern set when they played in Liverpool this month, services inflation could rise by up to 0.3 percentage points. Krishan said higher-than-expected inflation data in August may encourage Bank of England officials to postpone interest rate cuts in September.

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Other analysts doubt Ms. Swift’s ability to have a seismic effect shown 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 Bank. “I don’t think relying on star concerts is a sustainable option for growth in a country.” “

Barclays expects Ms. Swift’s tour to… An increase of about one billion pounds ($1.3 billion) in the British economyBut these suggestions are difficult to prove, Mr. Moran said, because no one knows how much people are shifting their spending from other activities. Even in this case, one billion pounds will not be enough to revive the stagnant British economy.

However, Mr Moran added that for individual cities and specific sectors, the tour could have a beneficial impact. 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 shows in London would be Saving £300 million for the economy.

“The impact will be more local than global,” Moran said. “Taylor Swift is clearly a huge phenomenon, and the areas she visits are causing a huge buzz in the hospitality industry.”