The recovering trend in consumption

The outbreak of the pandemic in early 2020 has had unprecedented repercussions in many areas of the economy. One of these has been household consumption, the main component of GDP and traditionally considered an indicator of the health of the economy and the well-being of society. Because of the restrictions on business and mobility during the health crisis caused by COVID-19, the drop in consumption was much greater than during previous crises. The positive side is that once restrictions were lifted, Spain’s consumption has rebounded more sharply in 2021 than in the past. In fact, in October the consumption tracker produced by CaixaBank Research using internal data was already 13% higher than in the same month of 2019.

Content available in
Màxim Ventura Bolet
December 17th, 2021

This trend should continue, albeit more moderately, during 2022 and 2023 (we predict consumption growth of 5.7% and 3.6% in 2022 and 2023, respectively). These forecasts are based on the assumption that, thanks to the vaccination campaign, there will be no need to impose restrictions on business and mobility as severe as those in place until last spring. While factors have emerged that will take the shine off this recovery, such as rising energy prices and bottlenecks in global supply chains, as these subside in 2022 we believe that demand pent up during the pandemic, a recovering labour market, improving consumer confidence, accommodative financial conditions and the boost from the Next Generation EU funds will continue to support the recovery in consumption.

In this report we focus on one of the most important underlying factors: pent-up demand. The impossibility of consuming a large number of services during the restrictions in 2020 and the consequent generation of forced savings (we estimate around €46.6 billion, 3.7% of 2019’s GDP) are boosting consumption now that businesses have reopened, supported by the fact that consumers perceive the crisis has been temporary (thanks to the vaccination campaign) and therefore see no need to keep a high level of savings for precautionary reasons. With the help of CaixaBank’s internal and completely anonymised data on more than 10 million clients, we have exhaustively analysed both the demand that has already materialised as well as its potential, according to the profile of each consumer.

Our results suggest that forced savings during the pandemic have been substantial but also very heterogeneous: the distribution of excess savings across low, medium and high-income groups was 4%, 58% and 38%, respectively. We have also found that these savings are mostly concentrated among people aged over 60. According to our analysis, accumulated savings are already being released in 2021 (specifically, low-income groups will use up 100% of their savings while this figure will be 67% and 36% for medium and high-income groups respectively), particularly benefitting the tourism, leisure and catering sectors.

We have also used this report to look at more structural issues regarding consumption patterns, using our internal data. Due to changes in consumption patterns, in 2020 the inflation faced by the average consumer was 0.1% according to our internal data (in contrast to the official figure of –0.3%), even higher for people over 60 and low-income groups. Finally, we have found that consumers generally spend more during the first week of the month and this pattern is especially pronounced among low-income groups and young people. In contrast, people over 60 and those on higher incomes tend to spend more evenly throughout the period.

Màxim Ventura Bolet