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 42%, or 21.6 million RMB per city, during the eight-week period. Spending on goods and services are both significantly affected with a decline of 44% and 43% respectively; within finer categories, dining & entertainment and travel saw the greatest dip of 72% and 64%. All 214 cities experienced significant consumption decreases with magnitudes ranging from 14% to 69%. Consumption responds negatively to the day-to-day changes in epidemic severity. Doubling the infected cases in a city is followed by 2.8% greater decrease in the same-city consumption. We also document signs of consumption recovery. By late March 2020, the consumption response narrows down to -31%, a 36% improvement over the lowest point. We infer that China’s offline consumption decreased by over 1 trillion RMB in the two-month post-outbreak period, or 1% of China’s GDP in 2019.