TAYLOR SWIFT INC.

Europe has a Taylor Swift problem: "Eras Tour" sparks inflation jitters

• Courtenay Brown  AXIOS 

JULY 19,2024

Photo illustration: Sarah Grillo. Photo: Ricardo Rubio/Europa Press via Getty Image

The Swifties are wreaking havoc across the Atlantic — or, at least on European economic data.

Why it matters: "The Eras Tour" is a source of faster price increases as concertgoers spend on food, tickets and hotels. That's making for a cruel summer, pushing inflation rates higher with possibly more distortions to come.

• Analysts attributed a surprise surge in Swedish inflation in May to three Swift concerts in Stockholm that drove up the city's hotel and other service prices.
• It comes right as British and Eurozone policymakers are trying to assess whether price pressures have receded enough to lower interest rates.

What they're saying: Swift's concerts, along with other high-profile events like the Olympics and the Euro 2024 soccer championship, will boost inflation in the services sector this summer, says Krishna Guha, the vice chairman of investment advisory firm Evercore ISI.

• "This will make it harder to read the underlying strength of inflation," Guha tells Axios. "The question is whether policymakers will be confident enough in their forecasts for continued disinflation to look through this."
• Guha thinks that might be the case for the European Central Bank, though he's less certain about the Bank of England.
• "We're at a turning point now as the Bank of England is eyeing the first rate cut. All the data matters," says Lucas Krishan, a macro strategist at TD Securities. The ECB is deciding when it might cut rates again.

By the numbers: U.K. inflation was hotter than expected in June. The service sector was to blame.

• Hotel prices rose almost 9% last month. Live music costs have spiked in recent months: Prices are up over 20% in the March through June period, well above the average three-month gain of 5% between 2018 and 2023.

That may seem alarming, but you need to calm down: This looks to be the Swift effect at work — at least, partly. The data coincides with multiple concerts in the U.K. last month.

• Swift's performances in London next month might have a larger impact since one lands on a possible "index day," when inflation data price quotes are collected.

• Higher hotel prices could temporarily add as much as 0.3 percentage point to services inflation, Krishan estimated in a note appropriately titled "The New Taylor Rule."
• Swift is, as far as we know, unrelated to Stanford economist John Taylor, who invented the Taylor Rule as a guide to where interest rates should be set.

The big picture: Even if concert effects are one-offs, European policymakers won't want to be reckless and take things too far, risking a nasty scar.

• In the U.S., strong demand for Swift and Beyoncé concerts last year showed consumers had an appetite to spend, despite higher interest rates meant to chill demand.
• A tourism boom in European nations including Portugal, Italy and Greece is already fueling services inflation in those nations.

European Central Bank head Christine Lagarde acknowledged earlier this month uncertainty around the "root cause" of lingering service sector inflation.

• Lagarde joked: "It's not just Taylor Swift, others have come as well."

The bottom line: Central bankers in Europe who see surprisingly high services inflation in this summer's data may be reluctant to just shake it off.