What and how did people in Portugal buy during the Great Lockdown period?June 22, 2020
While experts had warned about the likelihood of a pandemic given the increasing frequency of outbreaks in this century, SARS-CoV-2 caught the world largely unprepared. Over the last century, pandemics have been responsible for more deaths than armed conflicts. Their impact on economic activity is also overwhelming. This paper presents early evidence of the impact of the covid-19 pandemic on the Portuguese economy.
The paper uses novel and comprehensive data on electronic payments from SIBS, the main provider of point of sale terminals and on-line payments in Portugal. The data aggregates all individual transactions into monthly observations, by municipality and sector, between 2018 and 2020. We compare the year-on-year (YoY) change in the first four months of 2020 to the one of the two previous years. We identify a massive causal impact on overall purchases in March and April 2020, from a baseline YoY monthly growth rate of 10% to a decrease of 45% (Figure 1), with varying effects across sectors.
Figure 1: The Impact of the Great Lockdown on YoY growth rate of overall purchases, groceries, and leisure and tourism
Purchases of essential goods such as supermarkets and groceries increase mildly (Figure 1), contrasting with severe contractions in sectors that were closed by government order or depend heavily on tourism, including the leisure industry and restaurants.
The paper finds suggestive evidence of initial stockpiling of essential through a spike on pharmacy purchases in March that disappears in subsequent months (Figure 2). Households postponed essential expenditures in the health sector and in their relationship with the public administration.
Figure 2: The Impact of the Great Lockdown on YoY growth rate of pharmacies, health care service purchases, and technology and entertainment
It is also interesting to note the rapid recovery of purchases in technology and entertainment in April, after an initial drop in March, possibly to adapt to the confinement. Moreover, buyers adjust their shopping strategies in rational ways to minimize public health risks: they go less often to supermarkets and buy more each time, and visit local groceries more.
Click here to go to the paper by Bruno Carvalho, Susana Peralta, and Joao Pereira dos Santos.