Free DP Download 14 May 2020 - CONSUMPTION IN THE TIME OF COVID-19: Evidence from UK transaction data
CONSUMPTION IN THE TIME OF COVID-19: Evidence from UK transaction data
Sinem Hacioglu, Diego R Känzig, Paolo Surico
CEPR DP No. 14646 | April 2020
A new CEPR study by Sinem Hacioglu, Diego Känzig and Paolo Surico uses transaction data from a large fintech company to document a decline of 40-50% in the spending of British households during the Covid-19 crisis. Among the findings:
- The fall is concentrated in services such as retail, restaurants and transport.
- The initial rise in online shopping and groceries purchases has subsequently reverted. Income reductions have become far more frequent, with a median decline around 30%.
- The share of borrowers facing financing issues has increased significantly for both secured and unsecured lending.
- The share of users incurring bank charges, including those for overdrafts, has increased by 6% whereas the share of mortgagors with a decline in payments larger than 20% has more than doubled, from a value just above 4% in February to almost 10% in April.
- Consumption and income inequality have surged, with the most economically vulnerable groups experiencing the largest percentage decline.
- Mortgagors and higher earners in London record the most sizeable pound change.
- Greater London and the South East are the most affected regions whereas Wales and Northern Ireland are the least.
The study also provides country-specific estimates of the recovery rate, showing it to be about 21 days (a week longer than the 14 days typically assumed), and relatively homogeneous across Chinese provinces and for a selected number of countries.
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