Spending boosted by Barbenheimer and Taylor Swift tours in Q3 may not last, warns Morgan Stanley

PCE includes measure of consumer spending on goods and services among households in the US. It is a mechanism to determine how much income is being spent on consumption for various goods and services.

'Movie consumption' makes up around 0.2 percent and 'non-sports live entertainment' makes up around 0.05 percent of the total index.

Winter's coming

“These categories alone would have to see massive swings in order to impact overall economic activity, and they have,” the report said quoting Wolfe.

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But the end of the music tours in the US and the declining theatre viewership for these films could bring in a cruel winter as it may lead to a 0.6-percentage-point “hangover effect” to consumer spending in the fourth quarter.

Wolfe also said the return of student loan payments in the fourth quarter should pull consumption down by another eighth of a percentage point.

“The factors boosting 3Q consumption are extraordinary,” Wolfe said. “In 4Q, these factors not only unwind, but the October expiration of the student loan moratorium further weighs on consumption," she further added.

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Summer Sunshine

The huge ticket sales for Taylor Swift's concerts have provided a significant boost to the national tourism industry, according to a report by the Federal Reserve.

The Federal Reserve's Beige Book, a compilation of economic summaries from different regions of the country, revealed that Philadelphia's hotel bookings experienced their strongest growth since the pandemic began because of Swift's show dates.

The report states, "Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city."

Also Read | How Taylor Swift's Eras Tour is boosting the US economy

Coming to blockbuster movie ticket sales, Warner Bros' 'Barbie' and Christopher Nolan's 'Oppenheimer' released on the same day on July 21, 2023. The pair spiked box office numbers in July and August even as two Hollywood union strikes have essentially halted movie production.

Barbie is now the highest-grossing release in the US this year, while Oppenheimer is now director Nolan’s third-best performing movie ever, domestically.

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Winter Woes?

With the tours and the movies winding down, Wolfe’s team anticipates the PCE will contract by 0.6 percent between the third and fourth quarter. Real gross domestic product should eke out a 0.1 percent gain in the fourth quarter, the report stated.

As per the report, Wolfe thinks the central bank should take the cultural slowdown as another reason to be patient when deciding on the future path of interest rates.