Household behaviour: the Covid-19 “dance” phase

Until a vaccine arrives, forecasting economic activity is even more difficult than usual. For example, in the UK it is striking to see the difference between the IMF’s baseline scenario GDP loss of 6.5% for 2020, and the Office for Budget Responsibility’s “reference scenario” which projects a loss of 12.8%. In this unusual time, one of the main challenges is to understand how this crisis affects the consumption and investment demands of households. This research project aims to shed light on these unknown variables with a representative survey. First, we want to investigate how the crisis has already changed investment and consumption demands. Second, we want to understand the expected consumption and investment behaviour of households when lockdown restrictions are progressively lifted but prior to an effective treatment or vaccine being available. Knowledge on this point will be crucial for predicting the shape (V, U, L) of the future economic recovery. Do households expect to go back to their pre-crisis consumption and investment patterns, or do they plan to reduce consumption and increase saving? Which products or services do households plan to reduce, increase, or substitute? And to what degree? Third, we aim to understand the underlying reasons for the changes in behaviour. Fourth, we will investigate the household’s perception on the necessity of retaining various Covid-19 containment measures until the vaccine arrives.