Rock band Oasis reunion tour set to worsen UK inflation woes
Sign up now: Get ST's newsletters delivered to your inbox
The Britpop band’s sell-out concerts this month could lift headline inflation by as much as four basis points.
PHOTO: AFP
LONDON - The Oasis comeback tour looks set to add to a resurgence of inflation in the UK, complicating an already tricky situation that has divided the country’s central bank.
The Britpop band’s sell-out concerts this month could lift headline inflation by as much as four basis points if they coincide with the Office for National Statistics’ data collection dates, according to economists.
A jump in the consumer prices index would be unwelcome ahead of a crucial autumn for the Bank of England as it decides whether it can carry on cutting interest rates even as prices spike.
The situation echoes Taylor Swift’s UK tour last year when some commentators argued that it helped to fuel services inflation, primarily by pushing up hotel prices.
However, any effect will be temporary and contained to July and August’s data as the tour moves on to North America in September before returning to London long after possible data collection dates.
The Oasis reunion caused a scramble to see the most successful band of the 1990s Britpop era with fans paying hundreds of pounds for tickets, while songs such as Live Forever, Wonderwall and Don’t Look Back in Anger re-entered the UK singles chart.
The Gallagher brothers Noel and Liam – known for their feuding – last performed together in 2009.
The effect from the band’s Edinburgh gig may be amplified by it coinciding with the Fringe festival that takes over the Scottish capital throughout the month.
TD Securities said headline inflation will be lifted by four basis points at most with its data showing hotel prices booked one day in advance of the Aug 8 concert were, compared with the same period last year, 65 per cent higher for three-star hotels and up 50 per cent for four-star stays.
Capital Economics also pointed to a possible effect from one of the band’s Manchester concerts in July that happened the day after a possible collection date. It said there is “perhaps a greater chance of an effect with the Oasis concerts” than with Taylor Swift’s tour.
“The Bank will be able to have a go at quantifying it and ignore it as a one-off price effect that won’t be repeated,” said Mr Paul Dales, chief UK economist at Capital Economics.
“At the margin, though, it could give some more ammunition to those on the MPC who want to cut interest rates more slowly because they are worried about inflation being too high for too long. If in doubt, they may want to sit on the sidelines,” he added.
While the central bank policymakers cut interest rates last week by a quarter point, officials are becoming more wary over price pressures. They are particularly concerned about whether it causes second-round effects as workers try to make up lost income. The Bank of England now expects inflation to peak at 4 per cent in September, driven by a stronger-than-expected surge in food bills.
Mr James Rossiter, head of global macro strategy at TD Securities, said the Oasis concerts and Fringe festival “put immense upward pressure on hotel prices in Edinburgh”.
“It’s important to note that Edinburgh has a small weight in the hotel CPI index,” Mr Rossiter said. “At a stretch, if prices remain where they are, this could temporarily boost UK headline inflation by about 3 to 4 basis points in August.”
The ONS has tweaked how it collects hotel prices after recent volatility caused by surges in demand. Instead of relying on quotes on a single day, it now takes price readings at different times during the month.
Barclays estimates that fans expect to spend more than £1 billion (S$1.7 billion) attending the Oasis tour – an average of £766 per person.
However, economists believe that such events are unlikely to be a major boost for the economy as gig-goers merely offset the extra spending elsewhere. BLOOMBERG
