Consumption and saving patterns in Italy during Covid-19

Following the outbreak of the COVID-19 pandemic, household consumption fell dramatically and the propensity to save rose to unprecedented levels. In this paper we investigate the drivers of households' behaviour in Italy from a macro and microeconomic perspective. At the aggregate level, we find that only half of the slump in private consumption can be explained by the deterioration in economic conditions. The residual contribution can be traced back to other pandemic-related factors - such as the fear of infection, the lockdown policies and increased uncertainty about the future - whose relevance varies between expenditure categories. By complementing the macro analysis with microdata from the Bank of Italy's Special Survey of Italian Households, we find that, apart from any economic reasons, spending is held back more by fear of infection and uncertainty about the future than by the restrictive measures. Households where the head is self-employed are mainly discouraged by the fear of infection and uncertainty, whereas those where the head is unemployed are more concerned about their economic situation.