Swift and Babenhaimer: Culture Boosted Economy, but "Sustainability Seems Difficult"

Morgan Stanley "Unprecedented Sales Impact Economic Activity"
"Concerns Over Hangover Effect Lowering 4Q Consumption Growth Rate by 0.6%P"

Popular pop stars Taylor Swift and Beyonc?'s tours, the movie 'Babenheimer' (a portmanteau of the films 'Barbie' and 'Oppenheimer'), and other events that swept the U.S. pop culture scene this summer played a significant role in boosting consumption within the United States, according to an analysis from Wall Street. However, since these are temporary events, there are concerns that consumption may suffer a hangover effect in the fourth quarter once these cultural factors fade.

On the 31st (local time), CNBC reported that Morgan Stanley forecasted in a report that U.S. real consumer spending in the third quarter would increase by 1.9% quarter-over-quarter. The report evaluated that the tours of Swift and Beyonc?, along with the box office success of the movies Barbie and Oppenheimer, positively influenced consumption growth.

Popular pop star Taylor Swift
Photo by AFP Yonhap News

In fact, among the components that make up the Personal Consumption Expenditures (PCE) index, the shares of movie consumption and live entertainment excluding sports are only 0.2% and 0.05%, respectively. Yet, the concerts of popular singers and blockbuster movie hits that swept across the U.S. this summer influenced the overall consumer spending increase.

Sara Wolfe, an economist at Morgan Stanley, assessed that these events recorded unprecedented sales, stating, "For this factor to impact overall economic activity, there must be enormous fluctuations, and such changes actually occurred."

This consumption boom is also reflected in actual economic indicators. According to the U.S. Department of Commerce's report released that day, the personal consumption expenditure growth rate for July rose 0.8% month-over-month, up from 0.6% in June.

This analysis is not the first of its kind. Previously, Bloomberg Economics, the economic research arm of Bloomberg News, projected that the tours of Swift and Beyonc?, along with the box office success of Barbie and Oppenheimer, would generate an $8.5 billion economic impact in the U.S. in the third quarter, forecasting a 0.5 percentage point increase in U.S. GDP for the quarter.

These projections have emerged as the results of these events' successes have been announced one after another.

Earlier, the Philadelphia Federal Reserve Bank analyzed in its Beige Book economic report released last month that travel and tourism in the Philadelphia area showed strong performance in May due to Swift's concerts. The concerts led to full occupancy of hotel rooms near the venues, and fans engaged in various consumption activities throughout the concert cities, revitalizing the local economy.

The influence of Swift in stimulating local economies has even led to the emergence of terms like 'Swiftonomics' (a blend of economics and Swift) and 'Taylornomics.'

[Image source=AP Yonhap News]

In the case of the movies Barbie and Oppenheimer, the combined 'Babenheimer' craze has created a major box office hit in the U.S. Since Barbie's release on July 21, it has grossed $1,342,401,000 worldwide, becoming the highest-grossing film ever for its production company, Warner Bros. Discovery.

The problem is that since these events are one-off, the box office effects cannot be sustained over a long period. Morgan Stanley warned that once the tours of Swift and others conclude and moviegoer numbers decline, a 'hangover effect' could reduce the consumption growth rate by 0.6 percentage points in the fourth quarter.

Economist Wolfe said, "The consumption boost in the third quarter was extraordinary," adding, "In the fourth quarter, this effect will disappear, and with student loan repayments resuming in October, consumption will be pressured." He also noted that the U.S. Federal Reserve, which is conducting interest rate policies amid a battle against inflation, should take these cultural factors into account.