It’s not just Taylor Swift fans who are keeping an eye on her Eras Tour dates. One of Europe’s leading economists is acutely aware that the singer will spend the summer tearing around Europe’s 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 asked him about the risk that persistent inflation in the services sector could intensify, especially as Europe heads into a particularly busy summer with the Paris Olympics and the Euro 2024 soccer championship in Germany.
“Well, that’s really interesting,” he said at the event. “You managed to say all that without mentioning Taylor Swift.”
Miss Swift will tour Europe this summer, bringing with her hundreds of thousands of Swifties who spend on plane tickets, hotels, restaurants and friendship bracelets. She will perform the first of eight shows at Wembley Stadium in London on Friday; around 700,000 people are expected to attend the show in the British capital. And analysts are debating the economic impact it will leave.
Economists in the U.S. know that Eras is an economic tour de force. While consumers have spent on concerts, meals, vacations and other recreational experiences lost during pandemic lockdowns, one firm estimates that touring could generate $4.6 billion in North America alone from spending on tickets, merchandise and travel.
Central bankers are justified in analyzing the potential inflationary effects of the arrival of a global superstar: in May last year, when Beyoncé kicked off her Renaissance World Tour in Stockholm, one economist attributed a drop in inflation data to singer’s concert, as fans traveled from afar to attend the first show.
European central banks have started cutting interest rates, or are poised to do so, as inflation has slowed markedly over the past year, putting their 2% target rate within reach. But concerns remain that inflationary pressures have not been eliminated because price increases for services, including hotels and restaurants, are repeatedly higher than expected.
The demand created by the Eras Tour for hotel rooms and flights across Europe could push prices up, fueling each country’s inflation rate. Central bankers are sensitive to even the smallest changes in data as they try to distinguish one-off effects from long-term ones. If central bankers worry that inflation is not slowing as expected, they may avoid cutting rates.
“All these little quirks are going to matter a lot,” said Lucas Krishan, a strategist at TD Securities in London. They can “confuse the picture of central banks making these decisions.”
Portugal’s inflation rate accelerated last month, partly due to a rise in hotel prices in Lisbon “resulting from a major cultural event,” the country’s statistics office said. Swift performed in Lisbon on May 24 and 25.
The impact that events like Swift’s tour have on inflation can be tempered by how well a country’s economists anticipate the effect of her concerts so that investors and others aren’t surprised by the data. Policymakers at the European Central Bank have said the path to 2% inflation will be “bumpy” and that a relatively strong tourist season is already included in their forecasts.
But Krishan said it was possible that Swift’s August concerts, when the tour returns to London, could increase services inflation in Britain, especially because one of her tour dates could coincide with the day the national statistics agency records its price data. If hotel prices follow the pattern set when she performed 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 rate cut until September, Krishan said.
Other analysts are skeptical about Ms. Swift’s ability to have a seismic impact that shows up 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 to rely on superstar concerts.”
Barclays had predicted Swift’s tour would lead to a nearly £1 billion ($1.3 billion) boost to the British economy, but those assumptions are difficult to prove, Moran said, because no one knows how many people they are diverting their expenses from other activities. Even then, £1 billion would not be enough to revitalize Britain’s stagnant economy.
However, Moran added that for individual cities and some industries, the tour could have a significant impact. When tickets went on sale last summer, Airbnb searches in the host cities increased by more than 300% on average, the company said. The Greater London Authority estimated that Swift’s eight London shows would generate £300 million for the economy.
“The impact will be more local than macroeconomic,” Moran said. “Taylor Swift is obviously a huge phenomenon and the areas she is visiting are generating great interest in the hospitality industry.”
