Mega-events, like Taylor Swift shows and the Olympics, could distort headline inflation figures, UBS said.
- Global inflation could see a resurgence as the Olympics and Taylor Swift concerts drive demand.
- Mega-events tend to spike hotel and transportation costs, UBS said.
- Inflation in Europe and the US has cooled, but central bankers are still wary.
Global inflation could see a fresh resurgence thanks to a spending spree fueled by Taylor Swift concerts and the Olympics, UBS said.
The European bank warned that the two "mega-events" could create a sudden demand shock among consumers due to crowds rushing to Europe to see the sporting events and Swift's hugely popular shows.
Mega-events often lead to a spike in hotel and transportation costs, which could cause headline inflation to tick higher, even when the overall cost of living in those cities isn't increasing, the bank noted.
That may have been the case in the UK, it added, where hotel prices rose in June, possibly due to Swifties heading into the city to catch Taylor Swift's Eras Tour.
"The Olympic Games or a Taylor Swift concert create a sudden demand shock. Tickets for mega events will often sell for high prices—but that may not be recorded in consumer price data. The survey method used often overlooks specific event like this," Paul Donovan, the chief economist of UBS Global Wealth Management said.
"The measurement method for [hotel and transportation] prices is more likely to capture the unusual and transitory pattern of demand, and it is here that the increase in consumer price inflation takes place," he added.
Taylor Swift concerts, in particular, are known to be a super force in the economy. Swift's US tour caught the eye of the Federal Reserve in 2023, which noted in its beige book that the pop star's concerts were boosting local economies throughout the US.
In Europe and the US, prices have cooled from their highs in 2022, with inflation in both regions clocking in at 2%-3% in June. But central bankers are still keeping an eye on the pace of inflation, with US central bankers expressing caution about loosening monetary policy before inflation gets closer to their 2% target.
While markets have priced in ambitious Fed rate cuts in the US since the fresh rise in the unemployment rate that showed up in the July jobs report, hotter-than-expected inflation numbers could still cause push policymakers to delay easing policy. That could be bearish for stocks, and raise the risk of a potential recession, market commentators warn.