How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

Review of Asset Pricing Studies, R&R
Coauthors: Scott Baker, R.A. Farrokhnia, Steffen Meyer and Michaela Pagel

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.