Household consumption declines by 5% in Jan.-Sept., in comparison to 4.1% increase in 2019
Household consumption, a key measure of consumer activity in the economy, fell in 2020, amid the stay-at-home orders and the subsequent warnings by the health authorities against going out for shopping, dining-outs, travel and other recreational activities.
Accordion to the Census and Statistics Department data, the household consumption measured through the Final Household Consumption Expenditure (FHHCE) available through the nine months in 2020, has declined by 5 percent.
In comparison, in 2019, the household consumption increased by 4.1 percent in the nine months over the same period in 2018, albeit such expenditure was somewhat muted due to the Easter Sunday attacks.
In 2019, the growth in household consumption decelerated to 6.8 percent, from the 9.0 percent increase in 2018.
The data showed that the people and companies stockpiled cash from the onset of the pandemic, as they had limited spending options while the companies held on to their liquidity because their businesses came to a grinding halt, with the closure of the economy.
This was amply demonstrated by the surge in bank deposits – both demand and savings and time deposits.
However, there was a spike in the household consumption in the three months from July through September, with the economy returning to near normalcy, triggered mainly by the pent-up demand.
As a result, the FHHCE spiked 5.8 percent in the third quarter, over the same period in 2019, after plunging as much as 23.6 percent in the second quarter. However, now that most people look past the pandemic to go about their normal lives while adhering to health guidelines, there is a potential for the household consumption to come roaring back in the first quarter of 2021.
The current monetary stimulus by way of higher liquidity and lower interest rates may have provided the required incentives for people to loosen up their purse strings.