Taylor Swift's fans aren't the only ones keeping an eye on the dates of her Eraser tour: one of Europe's most prominent economists is keen to see the singer bouncing between European stadiums all summer.
European Central Bank Chief Economist Philip Lane had the pop star in mind when he spoke at an event on Monday, when the interviewer asked him about the risk that stubborn inflation in the services sector could intensify ahead of a particularly busy summer in Europe that includes the Paris Olympics and the 2024 soccer championship in Germany.
“That's so interesting,” he said at the event. “How you can say all that without saying Taylor Swift.”
Ms. Swift is touring Europe this summer, with hundreds of thousands of Swifties spending money on flights, hotels, restaurants and friendship bracelets. She'll perform the first of eight shows at London's Wembley Stadium on Friday, with an estimated 700,000 people expected in the British capital. Analysts are debating what impact the shows will have on the economy.
U.S. economists know Eras will be an economic feat: One firm estimated that the tour could generate $4.6 billion in North America alone from spending on tickets, merchandise and travel, as consumers splash out on concerts, meals, vacations and other entertainment experiences they missed during pandemic lockdowns.
Central bankers are right to scrutinize the potential inflationary effect of global superstar appearances: When Beyoncé kicked off her Renaissance World Tour in Stockholm last May, one economist wrote, inflation data spiked as fans traveled far and wide to see her first show.
European central banks have begun or are poised to begin cutting interest rates after inflation slowed significantly over the past year, bringing their 2% target rate within sight, but concerns remain that inflationary pressures are out of control as prices for services, including hotels and restaurants, repeatedly exceed expectations.
The demand that Erastour brings to hotels and flights across Europe could lead to higher prices that will affect inflation rates in each country. Central banks are sensitive to even the slightest changes in the data as they try to distinguish temporary from long-term effects. If they become concerned that inflation is not slowing as expected, they could postpone rate cuts.
“These small changes could have big effects,” said Lucas Kristian, a strategist at TD Securities in London. “They could potentially disrupt the landscape for central banks to make these decisions.”
Portugal's statistics institute said inflation accelerated last month, partly due to a surge in hotel prices in Lisbon “due to major cultural events,” in which Swift performed on May 24 and 25.
The impact of events like Swift's tour on inflation could be tempered by how accurately a country's economists forecast the impact of Swift's concert, helping to ensure investors and others aren't surprised by the data. European Central Bank policymakers have said the path to getting inflation back to 2% is “difficult” and that a relatively strong tourist season is already factored into their forecasts.
But Krishan said Ms. Swift's concerts in August, when her tour returns to London, could push up U.K. services inflation, especially since one of the tour dates could coincide with a day when the U.K. Statistics Office records price data. If hotel prices follow the pattern they showed when Ms. Swift performed in Liverpool this month, services inflation could rise by 0.3 percentage points. Mr. Krishan said the better-than-expected August inflation data might prompt Bank of England officials to postpone a September rate cut.
Other analysts are skeptical that Swift will be able to make a big enough impact to show up in national statistics.
“Taylor Swift is unlikely to influence central bank policy, and she's 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 that Swift's tour could boost the U.K. economy by nearly 1 billion pounds ($1.3 billion), but Moran said such a projection would be difficult to verify because no one knows how much spending people are diverting from other activities. Even so, 1 billion pounds would not be enough to jump-start Britain's stagnant economy.
Still, Moran added that the tour could have a meaningful 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 estimates that Swift's eight London shows could generate an economic boost of £300 million.
“The impact will be more local than macro,” Moran said. “Taylor Swift is obviously a huge phenomenon and the areas she visits create a huge buzz in the hospitality industry.”
