The Taylor Swift Economy Has Landed in Europe

It’s not just Taylor Swift fans keeping a close eye on her Eras Tour dates. One of Europe’s most prominent economists is acutely aware that the singer is spending the summer jetting between Europe’s stadiums.

Philip Lane, the chief economist at the European Central Bank, had the pop star on his mind when he spoke at an event on Monday. The interviewer had asked him about the risk that stubborn inflation in the services sector could intensify, especially with Europe heading into a particularly busy summer with the Olympics in Paris and the Euro 2024 soccer 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 touring Europe this summer, bringing in her wake hundreds of thousands of Swifties spending on airfare, 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 see the shows in the British capital. And analysts are debating the economic footprint it will leave.

Economists in the United States know that Eras is an economic tour de force. As consumers splurged on concerts, meals, vacations and other recreational experiences they missed out on during pandemic lockdowns, one company estimated that 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 the arrival of a global superstar: In May last year, when Beyoncé kicked off her Renaissance World Tour in Stockholm, an economist attributed a blip in the inflation data to the singer’s concert, as fans traveled from afar to witness the first show.

Europe’s central banks have started to cut interest rates — or are poised to — as inflation has slowed substantially over the past year, putting their 2 percent target rates within sight. But there are lingering concerns that inflationary pressures have not been stamped out because price gains for services, which include hotels and restaurants, are repeatedly higher than expected.

The demand that the Eras Tour creates for hotel rooms and flights across Europe could push up prices that feed into each country’s inflation rate. Central bankers are sensitive to even minute changes in the data as they try to distinguish one-off effects from lasting ones. If central bankers worry that inflation is not slowing as expected, they could hold off cutting rates.

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

Last month, Portugal’s inflation rate accelerated, in part because of a jump in hotel prices in Lisbon “resulting from 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 anticipate the effect of her concerts so investors and others are not surprised by the data. Policymakers at the European Central Bank have said that the path back to 2 percent inflation will be “bumpy” and that a relatively strong tourism season is already baked into their forecasts.

But Mr. Krishan said it was possible that Ms. Swift's concerts in August, when the tour swings back through London, could increase services inflation in Britain, especially because one of her tour dates may coincide with the day that the nation’s statistics agency records price data. If hotel prices follow the pattern set when she played in Liverpool this month, services inflation could rise as much as 0.3 percentage points. Higher-than-expected inflation data in August could encourage Bank of England officials to hold off on cutting rates in September, Mr. Krishan said.

Other analysts are skeptical of Ms. Swift’s ability to have a seismic impact that shows up in national statistics.

“Taylor Swift is unlikely to be affecting central bank policy. She’s unlikely to be affecting government policy,” said George Moran, an economist at Nomura. “And I don’t think it’s a sustainable option for growth in a country to rely on having superstar concerts.”

Barclays predicted that Ms. Swift's tour would lead to a bump of nearly 1 billion pounds ($1.3 billion) in the British economy, but those suggestions are hard to substantiate, Mr. Moran said, because no one knows how much people are diverting their spending from other activities. Even then, £1 billion would not be enough to revitalize Britain’s stagnant economy.

Still, Mr. Moran added that for individual cities and certain sectors, the tour could have a meaningful impact. When tickets went on sale last summer, Airbnb searches in host cities increased more than 300 percent on average, the company said. The Greater London authority estimated that Ms. Swift’s eight London shows would generate £300 million for the economy.

“The impact is going to be more local than macro,” Mr. Moran said. “Taylor Swift is obviously a massive phenomenon, and the areas that she’s visiting is causing a big buzz in the hospitality sector.”