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.
Bibliographical noteFunding Information:
We thank Dan Hamermesh, Sang Yoon (Tim) Lee, Jungmin Lee, Aljoscha Janssen and the online seminar participants at SMU and the Korean COVID‐19 study group for their helpful comments. This research was supported by the Ministry of Education, Singapore under its Academic Research Fund Tier 3 (MOE2019‐T3‐1‐006). Kim gratefully acknowledges the financial support from the IZA Coronavirus Emergency Research Thrust fund. We are grateful to Stephen Hoskins regarding various inquiries about the data. All the authors contributed equally and are responsible for any errors. There are no declarations of interest.
© 2022 Canadian Economics Association.
ASJC Scopus subject areas
- Economics and Econometrics