Stimulus payments, economic outlook, and retail consumption behavior

This study examines consumers’ retail consumption in response to government’s stimulus payments. Using aggregate retail sales data, we find an immediate consumption jump during the months of stimulus payments, and the increase is primarily associated with durable goods rather than and services. We further investigate the underlying reasons using individual-level survey data. The result suggests that consumers’ consumption behaviours are affected by their economic outlook. Pessimistic consumers spend stimulus payments on durable goods and have a higher marginal propensity to consume than optimistic consumers.