Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments*

The 2020 CARES Act directed large cash payments to households. We analyze households' spending responses using data from a Fintech nonprofit, exploring heterogeneity by income, recent income declines, and liquidity as well as linked survey responses about economic expectations. Households respond rapidly to payments, with spending increasing by about $0.14 per dollar during the first week and plateauing around $0.25-$0.30 over 3 months. In contrast to previous stimulus programs, we see little response of durables spending. Households with lower incomes, greater income declines, and less liquidity display stronger responses whereas households that expect employment losses and benefit cuts display weaker responses.

How does household spending respond to an epidemic? Consumption during the 2020 COVID-19 pandemic

We explore how household consumption responds to epidemics, utilizing transaction-level household financial data to investigate the impact of the COVID-19 virus. As the number of cases grew, households began to radically alter their typical spending across a number of major categories. Initially spending increased sharply, particularly in retail, credit card spending and food items. This was followed by a sharp decrease in overall spending. Households responded most strongly in states with shelter-in-place orders in place by March 29th. We explore heterogeneity across partisan affiliation, demographics and income. Greater levels of social distancing are associated with drops in spending, particularly in restaurants and retail.