- Morgan Stanley found a significant impact on consumer spending and the broader economy from the tours of Taylor Swift and Beyoncé and the summer movie blockbusters „Barbie” and „Oppenheimer.”
- But the company warned that a departure from these, along with the resumption of student loan payments, could drag on in the fourth quarter.
Taylor Swift, Beyonce, Barbie, Oppenheimer
Consumer spending shouldn’t be out of the woods.
Real spending is expected to be up 1.9% in the third quarter, driven by stadium tours by music superstars Taylor Swift and Beyoncé and summer movie blockbusters „Barbie” and „Oppenheimer,” according to Morgan Stanley. But the company warned on Wednesday that the economic halo may be short-lived.
Taken together, Morgan Stanley economist Sarah Wolff said the „unprecedented” earnings linked to these events should add about a seventh of a percentage point to consumption growth in the quarter. They fall under the movie consumption and non-sports live entertainment areas of the PCE, the personal consumption expenditure price index.
Those sectors account for 0.2% and 0.05% of the total index respectively. That means fans came and spent enough, usually in small business areas, to significantly boost the health of the broader U.S. economy.
„These segments alone would need to see massive swings to have an impact on overall economic activity,” Wolff said in a note to clients. „And they have.”
But as those concert tours in the U.S. end and theater attendances decline later this year, there could be a 0.6 percent „hangover effect” on consumer spending in the fourth quarter. At the same time, the rollback of student loan payments this fall should reduce consumption by another eighth of a percentage point, Wolff said.
„The factors driving 3Q consumption are extraordinary,” Wolff said. „In 4Q, these factors did not rest, but the October expiration of the student loan moratorium further weighed on consumption.”
Taylor Swift’s „Eras” and Beyoncé’s „Renaissance” tours filled arenas across the country and created an online buzz.
Swift’s tour, in particular, drew attention for its expensive resale market and failure to buy tickets, which drew Ticketmaster scrutiny from fans and lawmakers alike. Beyoncé made national headlines Washington, DC’s metro system then pays to operate After his show was delayed by bad weather.
Both tours were considered to have boosted the economy of the cities they visited, as fans flocked across the country for the chance to see the singers. Concerts and movies combined encouraged attendees to dress up, encouraging more spending on new clothes and accessories like friendship bracelets and custom black fedoras.
The impact has caught the attention of everyone from local business owners to the Federal Reserve. Last month, the According to the Philadelphia Fed Hotel bookings showed their strongest growth since the pandemic began when Swift arrived in town.
„Despite a slow recovery in tourism in the region as a whole, May was the strongest month for hotel revenue in Philadelphia since the pandemic began, a correlation due to the influx of guests to Taylor Swift concerts in the city,” central bank officials said in the Beige Book, a summary of economic activity released eight times a year.
Swift announced Thursday that a filmed version of her tour will debut in theaters on Oct. 13, the same day as Blumhouse Productions and Universal’s new „Exorcist” movie. The pair became known online as #Exorswift. While the Tour movie could provide a boost to movie ticket sales, the fourth quarter is already expected to see strong sales near the Oscars.
This is the second time this year that two unrelated films have been released on the same day. Warner Bros.’s „Barbie” and Universal’s „Oppenheimer” were known as „Oppenheimer,” and the pair topped box office numbers last month even as two Hollywood union strikes halted production.
„Barbie” has become the highest-grossing film in the U.S. this year, while „Oppenheimer” is now director Christopher Nolan’s third-best acting film domestically. With the help of other films, the opening weekend was the fourth biggest at the US box office.
Retailers in particular have jumped on the Barbie craze, hawking themed items from heeled shoes to pool floaties.
Wolf noted that the drag on consumer spending since the end of the student loan moratorium has been partially mitigated by the Biden administration’s 12-month reprieve. Under this scheme, borrowers who default on their loan for the first year are spared from some severe consequences.
Wolff expects the group’s real PCE to contract 0.6% between the third and fourth quarters as tours and movies end. Real GDP should gain 0.1% in the fourth quarter.
That change could get the Fed’s attention, Wolff says. He thinks the Fed, which is still waging a war on inflation, should take the cultural slowdown as another reason to be patient when deciding the future path of interest rates.
Disclosure: Comcast owns CNBC’s parent company Universal and NBCUniversal.
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