Consumption expenditure Special survey of consumption to evaluate the economic stimulus package

The economic stimulus package of the Federal Govern­ment included, among others, the temporary reduction of the VAT rates from 19% to 16% and from 7% to 5%. The reduced rates applied from 1 July to 31 December 2020.

A growing number of households used the VAT reduction for consumption purposes

In August 2020 nearly one house­hold out of seven in Germany (15%) brought major purchases forward or intended to do so because of the tempo­rary VAT reduction. This figure rose to one house­hold in five (20%) in December 2020. The tempo­rary VAT reduc­tion also provided a further incen­tive to make un­planned purchases. In August 2020, the VAT cut was an additio­nal incen­tive for 13% of house­holds. Their percen­tage rose to 16% until December 2020. In all, one house­hold out of five (20%) brought major purchased forward or made additional purchases in August 2020 because of the VAT reduc­tion. That percent­age rose to 25% until December 2020. This means that the num­ber of house­holds which brought forward or made additio­nal purchases to profit from the VAT cut increased over time.

Explanation of the diagram: Question „Will you bring planned major purchases forward because of the temporary VAT reduction or have you brought such purchases forward already?“

Especially households with children and higher-income households took the chance to profit from the VAT cut

The effect of the VAT reduction was particularly noticeable in house­holds with at least one child under 18 years. In August 2020, one house­hold in four (25%) with at least one child under the age of 18 brought major purchases forward or planned to do so because of the VAT reduc­tion. That percent­age increased slightly to 29% until December 2020. This applied to one out of eight house­holds without children (12%) in August 2020. That percent­age rose to 17% until December 2020. There are compa­rable though slightly lower percent­ages for additional and un­planned purchases. Roughly one house­hold in four (21% to 26%) with at least one child under 18 years made un­planned purchases in August to December 2020. The number of house­holds without children which made unplanned purchases was only about half as high (11% to 14%). In all, roughly one house­hold out of three (32% to 35%) with at least one child below the age of 18 made additional purchases and/or brought planned purchases forward because of the VAT reduction. So did appro­ximately one household out of five without children under 18 years (17% to 22%) in the same period.

Such VAT reduction effects were more noticeable in house­holds with higher income than in house­holds with lower income. From August to December 2020, 10% to 13% of house­holds with a monthly house­hold net income of less than 2,000 euros brought major purchases forward because of the VAT reduction. 22% of house­holds with a monthly income of more than 5,000 euros did the same in August 2020. Their percent­age rose to 34% until December 2020. There was a similar result for additional purchases. While the VAT reduction provided an additional incentive for roughly one house­hold in ten (9% to 13%) with a monthly house­hold net income of less than 2,000 euros, this was the case for twice as many house­holds with an income of more than 5,000 euros (15% to 24%). In all, roughly one house­hold out of six (14% to 17%) with a monthly house­hold net income of less than 2,000 euros made additional purchases and/or brought planned purchases forward because of the VAT reduction. 29% of house­holds with a monthly income of more than 5,000 did the same in August 2020. That percentage rose to 40% until December 2020.

Please note that the survey consi­dered total house­hold income instead of per capita income. This means that the group of house­holds with children and that with a higher income overlap to some extent as multi-person house­holds, on average, have a higher income. The survey does not assess the actual effect which the VAT reduction had on house­holds financially, for example by enhancing their purchasing power through price decreases.

VAT reduction primarily used to bring forward purchases of electri­cal appliances and furnishings

Roughly half of the house­holds (47% to 52%) which brought forward planned purchases in the period from August to December bought electri­cal appliances such as TV sets, frid­ges and lap­tops. A similarly high percent­age (43% to 50%) brought forward purchases of furnishings and house­hold articles such as furniture, lamps and table­ware. 23% to 30% brought forward purchases of vehicles (for instance cars, bicycles, motor­cycles) and 26% to 30% purchases of clothing and foot­wear. Multiple responses were possible here.

The economic stimulus package of the Federal Govern­ment included, among others, the payment of a child bonus of 300 euros per child. Generally, that money was paid out in two instal­ments to each household with a child entitled to children’s allowance: 200 euros in September and 100 euros in October. The bonus was not offset against social benefits but has to be compa­red, like children's allowances paid, with the effect of tax-free amounts for children under the fiscal equali­sation of benefits for families to find the option most favourable for the taxpayer.

More than half of the house­holds used the child bonus for consump­tion purposes, especially lower-income households

In August 2020, that is before the child bonus was paid out, slightly more than one out of two house­holds entitled to children’s allowance (55%) intended to spend the child bonus or part of it for consump­tion purposes. That percentage amounted to 60% in December 2020. Consump­tion purposes comprise the purchase of durable consumer goods (for example clothing and footwear, furnishings and household articles, electrical appliances, vehicles), expenditure on food and beverages and on entrance fees and services provided outside the home for leisure, culture and sports (including going to restaurants and pubs or on vacation).

In the period from August to December 2020, up to two thirds (57% - 69%) of the households entitled to children’s allowance with a monthly household net income of less than 2,000 euros planned to spend the child bonus entirely or partly for consump­tion purposes. The percent­age of house­holds with an income of more than 5,000 euros planning to do that was smaller (46% to 55%).

Another frequently mentioned option was saving the child bonus but this purpose lost in import­ance in the course of time. While roughly six in ten households (61%) planned to save the entire child bonus or part of it in August 2020, that is before the child bonus was paid out, only half of the house­holds (53% to 54%) intended to do so from October 2020 when the second rate was paid out. The child bonus is not offset against social benefits but compa­red with the effect of tax-free amounts for children in the income tax assess­ment from a specific level of income. Between August and December 2020, one in four house­holds entitled to children’s allowance (24% to 27%) assumed that its child bonus would be offset completely. This may have been the reason why house­holds put the child bonus away (at first) and did not use it for consump­tion purposes.

In addition to consump­tion and savings purposes, roughly one house­hold in five (16% to 21%) intended to use the entire child bonus or part of it to repay debts. One fourth of households (25% to 28%) used the child bonus for other purposes.

Question: What will/did you use the child bonus for? - Please distribute 100 points among the options listed. Assign 100 points to an option to state that you used/intend to use the entire child bonus for that purpose and assign 0 points to indicate that you have not used/will not use any of the money for that purpose. You may also distribute the points among the relevant options.

Child bonus primarily used to purchase durable consumer goods

Every month 71% to 79% of the house­holds which used the entire child bonus or part of it for consump­tion purposes purchased durable consumer goods. In roughly half of the cases where, for instance, clothing, furnishings or electri­cal appliances were bought, these purchases had not been planned for that period. This means that purchases of durable consumer goods were brought forward and unplanned additional purchases made because of the child bonus (possibly in combination with the temporary VAT reduction).

52% to 63% of the house­holds which used the child bonus for consump­tion purposes bought food and beverages. Appro­ximately half of the house­holds (49% to 51%) intended to use the child bonus to pay entrance fees and buy services provided outside the home in the field of leisure, culture and sports in August and September 2020. That percentage went down markedly from October 2020 to only 34% in December 2020. This was probably due to the increasing restrictions on account of the corona­virus pandemic.

The above results were taken from a special survey of consump­tion conduc­ted by the Federal Statistical Office on behalf of the Federal Ministry of Finance. The aim was to deter­mine what effect the measures taken under the econo­mic stimu­lus package 2020 had on house­holds. The focus was on whether and how the tempo­rary reduc­tion of value added tax (VAT) and the child bonus influen­ced the consump­tion behaviour of house­holds.

An external institute conduc­ted the monthly online surveys in the form of five waves from August to December 2020. Each month, roughly 4,200 people provi­ded infor­mation on their house­holds on a voluntary basis. Only house­holds that were entitled to children’s allowance in 2020 answered the questions relating to the child bonus.

The surveys used quota samples of repre­sentative house­holds, the respon­dents were aged 18 to 74 years. The micro­census 2019 served as a reference for the quotas and for extra­polation pur­poses. There are both samp­ling and non-sampling errors with this type of survey. Generally, it has to be noted that quota samp­les involve distor­tions of variables which are not part of the quotas and the extra­polation frame.

All data, inclu­ding income infor­mation, are based on respon­dents’ self-assess­ments. Respon­dents were asked how they intended to use this (additional) disposable house­hold income. What has actually been done with the money may differ from what respon­dents said they intended to do with it, and it may change in the course of time. This refers to the questions about both the VAT reduction and the child bonus. To what extent the measures of the economic stimulus package actually enhanced private consump­tion or reduced the financial burden on house­holds can there­fore not be directly inferred form the survey. It does not provide infor­mation on the amounts spent or saved under the measures of the economic stimulus package, either.

The Federal Statistical Office (Destatis) condu­cted the survey on the basis of Section 3 (1) no. 16 of the Federal Statistics Act (BStatG).

Selected results of the special consumption survey to evaluate the economic stimulus package (only in German):

• Special consumption survey to evaluate the economic stimulus package - August 2020
• Special consumption survey to evaluate the economic stimulus package - September 2020
• Special consumption survey to evaluate the economic stimulus package - Oktober 2020
• Special consumption survey to evaluate the economic stimulus package - November 2020
• Special consumption survey to evaluate the economic stimulus package - Dezember 2020