The Impact of the COVID-19 Pandemic on Consumption: Learning from High Frequency Transaction Data

Abstract

We use daily transaction data in 214 cities to study the impact of COVID-19 on consumption after China’s outbreak in late January 2020. Based on difference-in-differences estimation, daily offline consumption—via UnionPay card and QR scanner transactions—fell by 32%, or 18.57 million RMB per city, during the twelve-week period. Spending on goods and services were both significantly affected, with a decline of 33% and 34%, respectively; within finer categories, dining & entertainment and travel saw the greatest dip of 64% and 59%. The consumption decrease is prevalent across cities with the largest drop occurring in the epicenter Wuhan (by 70%). Consumption responded negatively to the day-to-day changes in epidemic severity while distancing measures remained stable. Consumption had rebounded back to the baseline level by the end of March but dropped to -20% in early April due to the elevated risk of a second wave of infections. We infer that China’s offline consumption decreased by over 1.22 trillion RMB in the three-month post-outbreak period, or 1.2% of China’s 2019 GDP. Our estimates suggest a significant economic benefit of containing the virus through a lessened consumption decrease and a faster consumption recovery.

Keywords: COVID-19, coronavirus, pandemic, consumption, economic impact, policy response, fiscal stimulus, transaction data

JEL Classification: E21, E62, E61