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

Mai Dao, La-Bhus Jirasavetakul and Jing Zhou

No 2024/128, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: pandemic consumption; housing wealth; COVID recovery; household wealth; consumption growth; Consumption; Income; Housing; Private consumption; COVID-19; Global (search for similar items in EconPapers)
Pages: 33
Date: 2024-06-21
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