The Taylor Swift Era, Consumer Spending & Inflation Clarity

Posted by John Lohse, CFA

Thursday, July 20, 2023

As the dog days of summer roll on, and many of us are taking advantage of warm weather and time off to enjoy experiences, American consumer spending patterns are coming into focus. One experience in particular has captured the most attention and has managed to exemplify today’s consumer—Taylor Swift’s ‘The Eras Tour.’ As the tour scorches through the summer (and in an admittedly light economic data week) we take a look at the revenue generation, and economic trajectory of the world’s biggest pop star’s shows, and how it translates to shifting consumer spending habits that shape inflation.

The Eras Tour officially launched March 17, 2023, and not a single “Blank Space” could be found in the audience of 69,000 fans in Glendale, Arizona. The first 22 shows grossed over $300 million, according to Pollstar, a trade publication for the live music and concert industry. For those 22 performances, a total of 1,186,314 tickets were sold with an average ticket price on the primary market of over $250 (re-sale market prices typically far exceed that). The average show grossed more than $13.6 million and was attended by nearly 54,000 each night. At that pace, the North American leg of the tour, which is scheduled to conclude this August, would gross over $700 million. Following a bevy of international performances, the tour is scheduled to conclude August 17, 2024, at what will be a sold out Wembley Stadium in London, and conservative estimates project total gross ticket revenue of $1.4 billion.

Not only are Swift and her team reaping profits, but the municipalities where the shows are being held are experiencing a less than “Cruel Summer.” The impact of the performances was significant enough to be noted in the July 12 release of the Federal Reserve’s (Fed) Beige Book report: “…May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.” But Philadelphia wasn’t the only city experiencing a “Love Story.” When The Eras Tour hit Chicago, the city experienced 97% hotel occupancy. Based on data compiled by research company QuestionPro, Billboard projects 2023 spending on total concert-related expenses to reach $5 billion, larger than the GDP of 50 countries.

These spending anecdotes shed light on a larger trend that’s occurring across the U.S. economy—consumers have re-focused spending from goods to services. The chart below highlights the magnitude of the levels of each.

View enlarged chart

A large amount of pent-up demand is being spent on the services sector. It’s likely we could see a bit more upside in the short term, but when consumers approach the end of the services-related spending spree, coupled with a decline in goods spending, we expect to see total demand wane. We’re looking for multiple things that could be the impetuses for a slower growth rate in the demand for services. One of those is a slowdown in the hiring intentions of small businesses as recently reported by the National Federation of Independent Businesses (NFIB). Another, which we’ve recently highlighted, is a softening of the rent component of inflation as multi-family unit construction strengthens. As overall spending cools it’s likely to ease inflationary pressures during the remainder of 2023.

While concert goers and market observers alike wrestle with prices, it’s important to maintain a watchful eye on spending trends and underlying components. These trends and components roll up to a morphing inflation picture we expect to continue to cool in the second half of this year, leading to an end of the Fed rate hiking campaign and further clarity on the economic outlook. As far as inflation is concerned it’s about time we “Shake it Off!”


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