Taylor Swift and Beyoncé won’t support the US economy much longer

Taylor Swift and Beyoncé won’t support the US economy much longer

Taylor Swift performs on stage in Glendale, Arizona on the opening night of “The Eras Tour.”
Kevin Winter/Getty Images

  • US GDP rose 4.9% during the third quarter, beating forecasters’ expectations.
  • Huge spending on entertainment and hospitality events, including concerts by Taylor Swift and Beyoncé, has helped fuel the boom.
  • But economists warn that the growth bump will not last forever, as Americans’ savings dry up in the age of the coronavirus.

Taylor Swift, Beyoncé, and the box office craze Barbenheimer all gave the US economy a much-needed boost this summer.

U.S. gross domestic product jumped a better-than-expected 4.9% during the third quarter, according to advance estimates published in late October, for the fastest growth rate since the end of 2021.

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Nearly half of the $8.5 billion expansion was driven by consumer spending — leading some to herald the emergence of so-called “happy inflation,” a nod to the emergence of entertainment and live events as a crucial economic driver.

But don’t count on the lift continuing for much longer.

Inflation will not last

Americans’ summer spending on concert and movie tickets didn’t come out of nowhere.

Most major events planned for 2020 and 2021 were shut down by pandemic-era lockdowns, before live performances and box office performances returned on a limited basis last year.

“Some of the spending wasn’t really surprising,” Mark Ostwald, chief economist at ADM Investor Services International, told Insider in an interview last week. “This was our first proper summer in four years.”

“There was a kind of pent-up need to get out, to go on vacation, to enjoy the summer in a way that wasn’t really possible, and even in 2022 it’s not quite there,” he added.

Others tend to agree with this opinion. Bloomberg economists Anna Wong and Elisa Wenger said in August that pent-up demand to see Swift, Beyoncé and Barbenheimer would contribute billions to US GDP — but added that inflation would likely be a “one-time event.” Every year”. The “blue moon phenomenon” is not a permanent trend.

Americans have blown up their savings

Consumers are tempted to finance their big-ticket purchases by dipping into their remaining coronavirus-era savings — and it looks like the massive pile of cash is finally about to run out.

The personal savings rate’s measure of disposable income peaked at 32% at the start of the pandemic in April 2020, but has declined steadily in recent years, falling from 5.3% to just 3.4% this summer alone.

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The falling savings rate tends to get lost in the hype about the U.S. avoiding a recession and a surprisingly resilient labor market — but running out U.S. cash reserves could weigh on growth and dampen inflation, according to ADM ISI’s Ostwald.

“Will it continue? No,” he said. “The savings rate was down, so a lot of people were basically spending far beyond what they were earning. You have other headwinds now, things like student loan repayments, and other risks like an auto workers strike.”

Don’t forget the Fed

Higher interest rates are also likely to make inflation a temporary trend.

Since March 2022, the Federal Reserve has raised borrowing costs from near zero to about 5.5% in an attempt to tame inflation — and while monetary policy tends to have a lagging effect, that has already begun to put pressure on Americans’ wallets.

The Fed’s tightening campaign has pushed the average 30-year fixed-rate mortgage to a staggering 7.8%, according to data from Freddie Mac, while unemployment has also crept up steadily in recent months.

“Much of the (GDP) strength came from temporary factors — the summer blockbusters of Barbenheimer, the concert tours of Taylor Swift and Beyoncé,” Bloomberg economist Eliza Wenger said in a preview of third-quarter U.S. growth numbers.

“The Fed has raised its benchmark interest rate by a cumulative 5.25 percentage points to slow the economy, and it is likely that some of the long and variable lags in monetary policy on the economy have not yet fully resolved,” she added.

In other words, it’s easier to talk yourself into spending thousands of dollars on a used ticket for an Eras Tour if you see it as just a one-off post-coronavirus blowout — and much harder to justify if you’re worried. About buying a house or losing your job.

That’s why Taylor Swift’s economy is unlikely to last.

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