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Short‐term impact of COVID‐19 on consumption spending and its underlying mechanisms: Evidence from Singapore

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  • Seonghoon Kim
  • Kanghyock Koh
  • Xuan Zhang

Abstract

We examine the short‐term impact of COVID‐19 on consumption spending and its underlying mechanisms using individual‐level monthly panel data from Singapore. Although Singapore's case fatality rate was one of the lowest in the world in the early stage of the pandemic (0.05%), we find that the COVID‐19 pandemic reduced household consumption spending by almost one quarter at its peak, with a larger response from households with above‐median wealth. We show that the reduction in consumption spending is associated with the nationwide lockdown policy, heightened economic uncertainty and reduced income. In addition, we find a substantial increase in monthly savings among households without income losses, suggesting a substantial rebound in consumption spending after the lifting of the lockdown. The results from June 2020 confirm this conjecture, as we find that consumption spending rebounded by about 10 percentage points in that month. Incidence de la COVID‐19 à court terme sur les dépenses de consommation et leurs mécanismes sous‐jacents : l’exemple de Singapour. À l'aide de données de panel mensuelles recueillies au niveau individuel, nous analysons l'impact de la COVID‐19 à court terme sur les dépenses de consommation et leurs mécanismes sous‐jacents à Singapour. Bien que le taux de létalité dans le pays ait été l'un des plus faibles au monde au début de la pandémie (0,05 %), nous avons observé une diminution de la consommation des ménages de près de 25 % lors du pic épidémique avec une réaction plus importante des foyers à revenus supérieurs à la médiane. Nous montrons que la baisse des dépenses de consommation est corrélée à la politique de confinement du pays, au contexte économique de plus en plus incertain et à la baisse des revenus. Nous constatons également que la baisse des revenus ne constitue vraisemblablement pas le facteur moteur dans la diminution globale de la consommation. En outre, nous observons une augmentation substantielle de l’épargne mensuelle des foyers n'ayant pas subi de perte de revenus, laissant entrevoir un net rebond des dépenses dès la levée du confinement. Les données de juin 2020 confirment cette hypothèse puisque les dépenses de consommation ont augmenté d'environ 10 % au cours de ce même mois.

Suggested Citation

  • Seonghoon Kim & Kanghyock Koh & Xuan Zhang, 2022. "Short‐term impact of COVID‐19 on consumption spending and its underlying mechanisms: Evidence from Singapore," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(S1), pages 115-134, February.
    • Handle: RePEc:wly:canjec:v:55:y:2022:i:s1:p:115-134
    DOI: 10.1111/caje.12538
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    References listed on IDEAS

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    2. Huang, Naqun & Pang, Jindong & Yang, Yanmin, 2023. "JUE Insight: COVID-19 and household preference for urban density in China," Journal of Urban Economics, Elsevier, vol. 133(C).
    3. Gordon Betcherman & Nicholas Giannakopoulos & Ioannis Laliotis & Ioanna Pantelaiou & Mauro Testaverde & Giannis Tzimas, 2023. "The short-term impact of the 2020 pandemic lockdown on employment in Greece," Empirical Economics, Springer, vol. 65(3), pages 1273-1307, September.

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