With the onset of the Covid-19 pandemic, many people found themselves saving much more of their income due to being confined to their homes. Many also discovered that their consumption habits had changed because of lockdowns and various disease-mitigating restrictions imposed by governments to stem the spread of the virus. This first CEPS In-Depth Analysis paper investigates consumption and saving behaviours during the COVID-19 pandemic in the five largest EU economies. Using a macro-based approach, the empirical analysis identifies the short-term effects of the pandemic in the form of forced and precautionary savings accumulated in the wake of the restrictions and the high uncertainty. Moreover, it finds some indications of long-term effects in the form of persistent lower consumption of services, hinting at a possible shift in household consumption patterns, particularly in northern European countries. Our results are in line with the outcomes of the Hodbod et al. (2021) survey. Overall, the evidence suggests that a sustained consumption-driven post-pandemic recovery is rather unlikely.
This research has received funding from the Horizon 2020 research and innovation programme of the EU under grant agreement No.101016233, H2020-SC1-PHE CORONAVIRUS-2020-2-RTD, PERISCOPE (Pan European Response to the Impacts of Covid-19 and future Pandemics and Epidemics).