Household consumption in a pandemic

What people might do with extra cash

Right now, with most of the extra savings, it seems people are:

• saving them as deposits in personal bank accounts
• paying down debt
• buying financial assets such as mutual funds and registered retirement savings plans

Strong activity in the housing market suggests some people are also trading up for more space.

If the pandemic is brought under control and households become more confident, we might see Canadians spend some of these savings. That’s because pent-up demand may cause an initial spike in dining out and travel. But it’s unlikely that people will feel the need to “catch up” and spend a lot more on services like trips to the dentist and haircuts.

When services were less available due to lockdowns, Canadians spent more on goods. When the economy opens back up, spending habits will likely shift to a balance between goods and services.

But it will take a while for spending to return to pre-pandemic levels. We don’t have a clear timeline for when life will return to normal, and key risks that could postpone this return to normalcy remain:

• a third wave of infections and lockdowns
• delays to the vaccine rollout
• uncertainty around COVID-19 variants