The Impact of Covid-19 on Consumer Spending

This letter describes the impact of the pandemic on private consumption, which accounts for just over half of national income (GNI*). We outline a methodology for using high-frequency data to track developments in consumption, and show the importance of accounting for pandemic-induced changes in spending patterns when measuring aggregate output. The expansion of firms’ online presence has mitigated the effect of the pandemic on total spending. The impact of the pandemic has varied across income groups with low income households more likely to see spending falls. While there may be significant forced savings accumulated as a result of the pandemic, this has largely been concentrated in higher income households. These households spend relatively less of each euro of additional income in normal times, meaning that the boost to consumption when the pandemic is over is likely to be lower than would be the case if the shock had been equally distributed.