Drivers of Post-COVID Private Consumption in the U.S.

By Mai Dao, La-Bhus Fah Jirasavetakul, Jing Zhou

June 21, 2024

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Mai Dao, La-Bhus Fah Jirasavetakul, and Jing Zhou. Drivers of Post-COVID Private Consumption in the U.S., (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Private consumption in the U.S. has recovered swiftly from the pandemic trough and has been running above the pre-pandemic trend even as interest rates rose sharply. This paper examines the underlying drivers for this strong growth in consumption. Using both state- and household-level data, we find that excess savings from the pandemic, large increases in household wealth (especially housing), along with solid real income gains contributed to strengthening post-pandemic consumption. Compared with pre-COVID estimates, the marginal propensity to consume out of housing wealth is substantially higher, which, together with large gains in housing prices, made the wealth effect a key driver for post-pandemic consumption growth.

Subject: Consumption, COVID-19, Health, Housing, Income, National accounts, Private consumption

Keywords: Consumption, Consumption growth, COVID recovery, COVID-19, Global, Household wealth, Housing, Housing wealth, Income, Pandemic consumption, Private consumption

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/128
Stock No:

WPIEA2024128
ISBN:

9798400281044
ISSN:

1018-5941

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