Broadway has lost some of its razzle-dazzle and that may give the data-dependent Federal Reserve reason to hold interest rates steady at this week’s Federal Open Market Committee meeting.
Understanding the path of the economy has been a head-scratcher for market watchers and economists alike. Just last week economic forecasts from three of Fed’s regional banks showed disparate views on the state of the economy: the Federal Reserve Bank of Atlanta’s GDPNow forecasting model showed a white-hot third quarter economy with gross domestic product at 4.9% while the St. Louis Fed’s Real GDP Nowcast said the economy is in contraction, registering negative 0.25% growth. The New York Fed’s Nowcast model, meanwhile, split the difference and said the economy is growing at 2.2%.
And just to make things more confusing, the St. Louis Fed ended up revising its forecast to say the economy is in fact in growth mode, clocking in at 1.7%. While the consensus view may start to look like more of an actual consensus, the spread between predictions no doubt makes the Fed’s job trickier.
“Either way you look at it, it’s very remarkable, the data at this moment is pointing in all different directions,” Torsten Sløk, chief economist at Apollo Global Management, told Barron’s.
One bit of data that is consistently showing a slowing economy is Broadway attendance, which has been in decline at a “faster-than-normal” pace in recent weeks, Slok observed. Attendance is down 9% from the Labor Day holiday weekend, according to data from the Broadway League. That drop could be a downturn off a tourist-heavy weekend, but the overall trend since April—roughly when Phantom of the Opera ended its 35-year run—has also been down.
Lower attendance also means lower ticket prices. Even popular shows are getting bodies in seats for less money. Back in February, Slok noticed that high Broadway attendance meant that people were taking the Fed’s interest-rate hikes in stride and opting to spend money on experiences. At the time, Phantom, in its final weeks of performances, was one of the hottest tickets in town commanding $205 per seat, on average. Now Hamilton appears to be the big draw, packing in houses but for only $165 per seat, according to Broadway League data.
Many will say that relying on New York City theater prices to make a broader point about the economy is silly but the benefit of this data is that it updates weekly, providing more of a real-time glimpse of economic behavior. Much of the other data economists use operates on a lag of a month or more.
“For markets, this is important because consumer services continue to be the key reason why the economy, despite significant Fed hikes, is still holding up,” Slok said. Just look at some of the data from this summer: Taylor Swift’s Era’s tour was said to lift the economies of several cities she visited while the U.S. Open saw record attendance this summer at the tennis world’s final Grand Slam of the year. Not to mention the summer travel season being in boom times.
But one thing to note about these events compared with Broadway is their scarcity. Barring a pandemic, Broadway theaters put on eight-shows a week, year round. Despite what Swifties hope for, Taylor Swift can only do so many shows, the U.S. Open is a two-week event, and the summer travel season is dictated by school schedules.
The key will be to see if Broadway rebounds with a slate of new shows opening this fall including: How to Dance in Ohio, Merrily We Roll Along, and Spamalot.
Meanwhile, Slok sees other signs that the economy is slowing. Delinquency levels for credit cards and auto loans are approaching prepandemic levels and the resumption of student loan payments in October is also expected to put some downward pressure on consumer spending.
While the Fed is unlikely to hang a Mission Accomplished sign soon, its months of rate-hikes may finally be doing their job.
Write to Carleton English at [email protected]
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