Yahoo Finance Why the Taylor Swift economic boost may not be real
FRANKFURT (Reuters) — Taylor Swift is taking Europe by storm, prompting some pundits to envisage an economic windfall as fans flock to dozens of sold-out shows from Dublin to Vienna and beyond.
It is hoped Swift, along with the Olympics Games in France and the Euro 2024 soccer championship in Germany will provide a shot in the arm for a continent that has just skirted recession for most of the past two years and badly lagged the United States.
But there's a problem: "Swiftonomics" may not actually be real.
Swift may be a megastar revolutionizing the music industry, but the economic benefit of her tour shows to local economies is having less of an impact.
Take Stockholm as a case in point. Close to 180,000 fans attended her three shows in May, with half of them coming from abroad and generating close to 850 million crowns ($81 million) in turnover for the city.
That's a great three-day haul for Stockholm. But it's a drop in the bucket even for the modestly-sized Swedish economy, which ranks eighth in the European Union with annual output of $623 billion.
“This extra turnover is a great weekend boost for Stockholm and in particular, its tourism sector," said Carl Bergkvist, chief economist at the Stockholm Chamber of Commerce.
"But it’s just that — a weekend, with no visible or significant impact on overall economic growth.”
Hotels and restaurants made a killing, while cowboy hat sales surged 155%, the Chamber estimates.
The impact on prices is similarly slight and could even be smaller than when Beyoncé performed in the city a year earlier, sparking a temporary inflation scare. Swedish inflation has since fallen from 10% to just over 2% now.
"Is there a Taylor Swift effect? It’s extremely small and temporary, at best," said Carsten Brzeski, an economist with ING.
"There is copious research in the run-up to big events outlining the economic benefits but after the fact you need a magnifying glass to find these so-called benefits in the numbers," Brzeski said.
The verdict is the same for big sports events like the Olympics or the Euro 2024 soccer competition. They're a boon for restaurants, beer sales and merchandise sellers, but don't durably affect consumption patterns.
"The consumer spending that occurs is expenditure that would happen anyway and tends to be a form of substitution," explained professor Simon Shibli of Sheffield Hallam University.
The argument is that cash spent on a concert ticket or a hotel would come from the family budget, meaning there would be less left for other expenditure such as restaurants or travel.
Danske Bank's tongue-in-cheek "draft beer index" showed massive surges when Denmark's soccer team played in a previous European Championship. It topped out at a 106% rise in pub and restaurant receipts for a game against England's team, compared with the usual take.
“On a micro level, such events do provide a boost, but even that is small and temporary," Danske's Piet Haines Christiansen said. "They are relevant for specific sectors, like for hotels and catering wherever Taylor Swift goes or for beer sales in countries that are playing football."
Some local media last month jumped on Barclays research about the spending habits of Swifties to suggest her concerts would bring in one billion sterling for the UK economy.
But besides the likely substitution effect they have on other spending, there is also the fact that much of the income from the Swift tour will end up in the United States - muting an already small local economic benefit.
For economies the size of Britain or those in continental Europe, any such transfers would not move the dial on their trade ledgers either: the 20-country euro zone had a balance of exports over imports of no less than 39 billion euros in April alone.
(Reporting by Balazs Koranyi; editing by Mark John and Tomasz Janowski)
