Is Taylor Swift pushing up inflation in the UK?

Hotel prices surged during the time Taylor Swift toured in the UK, Mahatir Pasha reports

The world’s biggest music artist has won a whole host of awards and broken many records, but Taylor Swift may well have achieved something truly unexpected this time by pushing up the UK’s inflation.

Swift’s globe-trotting Eras Tour arrived in Edinburgh in June, she then went on to perform in Liverpool, Cardiff and London.

Around the same time, in a single month, hotel prices rose by 8.8% compared with a much smaller rise of 1.7% in June 2023, according to figures released by the Office for National Statistics (ONS) on Wednesday morning.

The significant hike in the price of accommodation was the single biggest factor keeping the headline annual rate of inflation in the UK at its target level of 2% for a second month in a row, rather than falling as most economists had expected.

The Bank of England had forecast inflation to fall to 1.9% last month.

Michael Saunders, former member of the Bank’s Monetary Policy Committee (MPC) which sets rates, said there was a “Taylor Swift Effect”.

“You had some very sharp rises in hotel prices, and we've seen a similar thing in other countries where the Taylor Swift tour went round and hotel prices rose sharply during the period of those concerts,” Mr Saunders told ITV News.

"But an effect like that should be temporary. It will unwind in the next month or two. So that's one of those factors which while it might have lifted inflation, the Bank of England will really not take it seriously as a factor that will continue to lift inflation going forward."

Michael Saunders said the Bank of England may not have allowed for the Taylor Swift effect

Mr Saunders argues that the Bank mainly focuses on where inflation is likely to be in a year or two, as there is a delay before the full effects of monetary policy impact the economy.

The Bank has made it clear that before it can cut rates, it needs more evidence of the labour market and wage growth weakening. It also wants to see price inflation in the service sector, which is currently running at 5.7% - to come down.

A recent report looking into “Swiftonomics” (the economic influence of Taylor Swift) estimated UK consumers will spend nearly £1 billion on the Eras Tour, around £848 per person on average across her 15 UK tour dates. The figure takes into account ticket costs, accommodation, travel and clothing.

But there’s a risk of overplaying Swift's influence on accommodation prices.

Japanese bank Nomura points out that hotel prices do always increase in the first half of the year, but in the six months from January this year, prices are up almost 13%. Pre-Covid the rise was closer to 4.5%.

Services inflation is probably also being impacted by the National Living Wage, which increased to £11.44 in April. Minimum wage workers tend to work disproportionately in the hospitality sector.

Swift’s love affair with the UK isn’t over yet though - she is set to return to the capital to perform at Wembley Stadium in August five times before officially ending the European and UK legs of her tour.

A cause for excitement for Taylor Swift fans, but her return won’t be causing Andrew Bailey any sleepless nights. Pay growth and service inflation will be on the governor’s mind as the BoE meets to set rates next month.

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