The Bank of Spain anticipates an “intense” recovery in household consumption in “a few quarters” due to their perception that the impact of the health crisis will be transitory and not persistent over time, unlike what happened in previous recessions. In an article in which it analyzes the recovery of consumption in 2021 based on consumer expectations, the Bank of Spain points out that Spanish households, “compared to other previous adverse shocks”, They perceive that the ‘shock’ caused by the Covid has a lower degree of persistence. “This would point to a rebound in private consumption once the health crisis is resolved, which would tend to offset the decline observed during the pandemic,” says the institution.
The Bank of Spain indicates that the impact of the pandemic on the confidence of the agents was “sudden and intense”, but for the most part transitory, which in itself could contribute to making the recovery of activity, once containment measures have been lifted, “more robust.”
“Consumers would have perceived that the impact of the crisis does not have a very high degree of persistence, which would contribute to an expansive behavior of household spending underpinning the recovery of activity”, underlines the body led by Pablo Hernández de Cos . This behavior, the institution adds, is “novel” with respect to what has been observed in other recessions, which could be explained by the “forceful” response of economic policies to strengthen agents’ expectations and contribute to recovery.
«In the specific case of consumers, the ERTE mechanism, credit moratoriums and the maintenance of very favorable financial conditions would not only have strengthened the income and equity position of these agents, but would also have strengthened their confidence in a rapid rebound in the economy, “he says.
Additionally, the Bank of Spain affirms that “the rapid improvement in the expectations” of the agents regarding the evolution of the economy could also be partly “The reflection of the processes of adaptation to the pandemic and the measures introduced to contain it”. These processes, which would have included, for example, the adoption of teleworking and online commerce, would have allowed economic activity to have suffered to a lesser extent for a certain degree of restrictions.
On the other hand, the Bank of Spain emphasizes that, during the pandemic, households have accumulated an “important savings bag” due to the impossibility of consuming certain goods and services and due to the uncertainty about their future income.
Although there are various arguments that suggest that this accumulated saving would be transferred to consumption only in a limited way once the health crisis is resolved, such as, for example, that the households that have saved have been mostly those with high incomes, which have less propensity to consume or the possibility that agents interpret that the strong increase in public debt will lead to higher future taxes, the Bank of Spain foresees a “relatively rapid fading” of the precautionary reasons that explained part of the increase in saving during the pandemic.