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What Halloween Spending Says About the Economy

Kimberly Palmer

Anyone looking for evidence that the economy is rebounding need look no further than neighbors' front porches. The increase in spending on Halloween decorations, as well as other Halloween-related accessories, suggests that "people overall are feeling a little bit better about their finances," says Kathy Grannis of the National Retail Federation (NRF).

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Grannis says that optimism, combined with the growing popularity of the holiday itself, is why the NRF's recent consumer-spending survey found that more Americans will celebrate Halloween this year (71.5 percent versus last year's 68.6 percent) and they also plan to spend more on decorations, costumes, and candy ($79.82 versus last year's $72.31).

That uptick in Halloween-related spending mirrors other positive signs of consumer behavior, including consumer lending and self-reported data. And with consumers driving 70 percent of GDP, that's good news for the broader economy.

"We're seeing an uptick in consumer lending of almost 20 percent pretty consistently across lending categories," including auto lending and home equity loans, says Beverly Ladley, head of consumer lending at SunTrust. "Consumers are really starting to feel a little more settled, and comfortable borrowing again," she adds.

Consumers are also increasingly using home equity loans to make repairs or improvements, which Ladley says points to improved financial well-being. "[Clients] are starting to feel like they're on more solid ground, and they want to move forward," she says.

Indeed, the Federal Deposit Insurance Corporation (FDIC) reports that the commercial banks and saving institutions it insures saw their total net income rise in the second quarter of 2012 to $34.5 billion, compared to $28.5 billion for the same quarter last year. The FDIC noted that those gains suggest "gradual but steady progress toward recovery."

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Meanwhile, the Conference Board announced last week that the Consumer Confidence Index improved in September after declining in August. "Consumers were more positive in their assessment of current conditions, in particular the job market, and considerably more optimistic about the short-term outlook for business conditions, employment, and their financial situation," the Conference Board reported in a statement.

Those findings echo an earlier survey from Citi, which found that Americans are feeling increasingly optimistic about the economy as compared to last year. While Americans still face economic uncertainty when it comes to the presidential election and federal tax policies for next year, there are fewer things to worry about than there were last year, says Jonathan Clements, director of financial education at Citi Personal Wealth Management. He adds that 2011 saw Standard & Poor's downgrade of U.S. Treasures, European bank concerns, and a heated Congressional debate about the debt ceiling.

The Citi Economic Pulse survey found that Americans are sacrificing less than they were last year, feel more in control of their finances, and feel more optimistic about their own local economies.

Still, it's been a rough decade for Americans: The Pew Research Center recently labeled the 2000s a "lost decade" for the middle class because household income and net worth have both declined for that demographic, just as it has shrunken in size. Household income for middle-class Americans, which peaked in 1999, has still not returned to that level, as Americans struggle to fully recover from the most recent recession. The latest jobs report shows the unemployment rate at 8.1 percent, which is lower than the 10 percent experienced in October 2009, but still relatively high.

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The more recent signs of consumer optimism could help explain why so many are already snapping up elaborate costumes and Halloween décor. "Halloween has morphed into a month-long celebration of fall. People start going to haunted houses as early as October 1, and it all leads up to one dramatic night," says Grannis.

Even purely optional items, such as adult and pet Halloween costumes, appear to be flying off the shelves. The most popular costumes for the over-18 crowd this year are witches, vampires, and pirates, and popular children's costumes include princesses, Batman, and Spiderman. Pets get in on the act, too, with pumpkin, devil, and hot-dog outfits. Families with kids are expected to spend a total of $1.1 billion this year, according to the NRF's survey. Most people also report that they will decorate their home or yard.

And the holiday season, another big time for spending, is just around the corner. Grannis says she thinks consumers will continue to celebrate with strong, but savvy, spending. She says, "Consumers have found a way to be very comfortable with their finances. It might mean researching prices more often, and looking for coupons more, and being a savvier shopper, but overall I think consumers are feeling a little bit better."

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