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The COVID-19 Consumption Game-Changer: Evidence from a Large-Scale Multi-Country Survey

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The profound COVID-19 lockdown experience could result in durable changes to consumer demand. We use household survey data from France, Germany, Italy, the Netherlands and Spain, collected after the first lockdown in July 2020, when initial restrictions were lifted. We identify the underlying drivers for consumption changes in five sectors: tourism, hospitality, services, retail and public transport.

We highlight five key findings:

  • Compared with their consumption before the COVID-19 outbreak, between 38 and 66 percent of households reported consuming “less than before” or “not at all.”
  • The fraction of households reducing their consumption relates on the whole to the severity of the COVID-19 health crisis, and on an individual level to a personal COVID-19 experience.
  • While infection risk is the most cited reason for reducing consumption, a substantial fraction of households reported that the lockdown experience altered their preferences. Many French, German and Dutch households reported not missing what they consumed before, and a large fraction of households shifted their retail consumption away from brick-and-mortar stores and to online alternatives.
  • Precautionary saving is an important driver for changing consumption patterns in Spain and Italy.
  • Only a small fraction of households reported financial constraints as the main reason for reducing consumption.

These findings bear three key policy implications:

  • Long-lasting changes in consumer demand should be considered in the design of fiscal programs to support businesses through the pandemic. Because some firms could become irrelevant for consumers, support may be too broad, and firms’ future viability should be assessed first whenever possible.
  • Broad-based policies to restore consumption to pre-pandemic levels by reducing prices (e.g., government tax cuts) are unlikely to be effective. Instead, fiscal support should target those households that are particularly hard hit by the crisis and help displaced workers retrain and find new jobs.
  • The objectives of protecting citizens from the virus and preserving economic prosperity do not lead to any trade-offs. Governments should treat infection control as a prerequisite.