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  5. Consumer Spending during a Pandemic: International Evidence from Transaction-Level Data
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Consumer Spending during a Pandemic: International Evidence from Transaction-Level Data

Paper Session

Monday, Jan. 4, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: Sinem Hacioglu, Bank of England

Tracking the COVID-19 Crisis with High-Resolution Transaction Data

Vasco M. Carvalho
,
University of Cambridge, Alan Turing Institute, and CEPR
Juan R. Garcia
,
BBVA Research
Stephen Hansen
,
Imperial College Business School and CEPR
Álvaro Ortiz
,
BBVA Research
Tomasa Rodrigo
,
BBVA Research

Abstract

We exploit high-frequency/high-resolution transaction data from BBVA, the second-largest bank in Spain, to analyse the dynamics of expenditure in Spain during the ongoing COVID-19 pandemic. Our main dataset consists of the universe of BBVA-mediated sales transactions from both credit cards and point-of-sales terminals, and totals 1.4 billion individual transactions since 2019. This dataset provides a unique opportunity to study the impact of the ongoing crisis in Spain - and the policies put in place to control it—on a daily basis. We find little shift in expenditure prior to the national lockdown, but then immediate, very large, and sustained expenditure reductions thereafter. Transaction metadata also allows us to study variation in these reductions across geography, sectors, and mode of sale (e.g. on- line/offline). We conclude that transaction data captures many salient patterns in how an economy reacts to shocks in real time, which makes its potential value to policy makers and researchers high.

Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments

Scott R. Baker
,
Northwestern University
Michaela Pagel
,
Columbia University
R. A. Farrokhnia
,
Columbia University
Constantine Yannelis
,
University of Chicago
Steffen Meyer
,
University of Southern Denmark

Abstract

The 2020 CARES Act directed large cash payments to households. We analyze households' spending responses using high-frequency transaction data from a Fintech non-profit and linked survey responses about economic expectations. Households respond rapidly to the stimulus payments, with spending increasing by $0.25-$0.40 per dollar of stimulus during the first weeks, concentrated in non-durables and payments like rents, mortgages, and credit cards reflecting a short-term debt overhang. Households with lower incomes, greater income declines, and lower levels of liquidity display stronger responses, highlighting the importance of targeting. Households that expect employment losses and benefit cuts display weaker responses.

The Distributional Impact of the Pandemic

Sinem Hacioglu Hoke
,
Bank of England
Diego R. Kaenzig
,
London Business School
Paolo Surico
,
London Business School

Abstract

The top quartile of the income distribution accounts for almost half of the pandemic-related decline in aggregate consumption, with expenditure for this group falling much more than income. In contrast, the bottom quartile of the income distribution has seen the smallest spending cuts and the largest earnings drop but their total incomes have fallen by much less because of the increase in government benefits. The decline in consumers' spending preceded the introduction of the lockdown, whose partial lifting has triggered a stronger recovery in sectors with a lower contact rate. The largest spending contractions are concentrated in the most affluent regions. These conclusions are based on detailed high-frequency transaction data on spending, earnings and income from a large fintech company in the United Kingdom.

Consumer Responses to the COVID-19 Pandemic

Noah Williams
,
University of Wisconsin-Madison

Abstract

As the COVID-19 pandemic spread across the United States, consumers changed their spending habits dramatically. The changes began with initial cutbacks in travel and restaurant spending, then accelerated as the crisis worsened in March, with most states implementing “stay-at-home” orders closing down non-essential businesses. By April, consumer behavior roughly stabilized, but with vastly different buying patterns and behavior compared to only a few weeks earlier. In this paper I analyze consumption trends nationwide and across states, using a new data source of weekly transactions. I find that the nationwide retail sales decline of roughly 9% in March masked a 10% increase mid-March and a 20% decline by the end of the month. There were vast changes in the makeup of consumption bundles: shifting away from travel and restaurants toward groceries and wholesale retailers. Moreover, there was a large change in buying patterns. The consumption decline overall was cushioned by increasing on-line sales, which also reallocated sales away from local businesses toward national retailers with a greater online presence. Consistent with a transaction cost model, consumers also made fewer trips to stores but increased their purchases per visit. In particular, there was a spike in grocery store sales of 80% nationwide (and 100% in Wisconsin) in mid-March, driven as much by a growth in sales-per-transaction as transactions.
Discussant(s)
Jonathan Parker
,
Massachusetts Institute of Technology
Atif Mian
,
Princeton University
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
  • D1 - Household Behavior and Family Economics