Halloween will be the first big spending event following the resumption of student loan payments

Consumer spending just got spookier.

For years, many economists and retailers have looked to back-to-school spending to predict how much consumers might drop on PlayStations, drones and — likely this year — new Barbie dolls come the high holiday season.

But the resumption of student loan payments this fall, after more than three years of pandemic forgiveness, is shining a light on another less likely harbinger of good financial tidings over the holidays this year.

Halloween has become the leading holiday some economists are watching to gauge the overall health of U.S. consumers this year, and imports of ghoulish goods have been weaker than in seasons past.

“If Halloween spending is a bust, that will be our best leading indicator of what may happen over the holidays,” Nikki Baird, vice president of strategy at retail technology company Aptos, said in a video analyzing current retail trends shared exclusively with The Messenger.

Baird said Halloween sales will be "the first real indicator" of consumer spending after the resumption of students loans, because it's a holiday that is driven almost entirely by discretionary spending. "And the people spending on that holiday are most likely to be impacted by student loan payments,” she said.

Student loan payments resumed on Sept. 1 and will be due starting in early October. The federal government paused repayments in March 2020 to provide some financial relief during the COVID-19 pandemic.

Holiday retail sales are projected to increase between 3.5% and 4.6% this year, with sales totaling $1.54 to $1.56 trillion between November and January, according to Deloitte's annual holiday retail forecast released Tuesday. While the growth is still positive, it is less than the 7.6% growth seen in the 2022 holiday season.

The pandemic also mauled at least two years of Halloween spending, as trick-or-treaters were forced to stay home and many families moved festivities to Zoom. But it didn't take long for spending on the most ghoulish night of the year to bounce back. In 2022, total Halloween spending hit a new $10.6 billion high, exceeding 2021's previous $10.1 billion record, according to the National Retail Federation.

To be sure, Scott Hoyt, senior director at Moody’s Analytics, is more cautious about whether Halloween will really capture the full effects of student loan repayments.

“It may be too soon for impacted consumers to recalibrate their spending,” he said in an email to The Messenger. “Any reaction may be more initial than long-run.”

Retailers are rolling out Halloween decorations earlier than ever as they brace for what could be a weaker spending season. Seaborne shipments of Halloween merchandise to the U.S. peaked in June this year, but still recorded lower imports compared to previous years, according to S&P Global Market Intelligence.

Shipments of Halloween costumes and accessories fell by 13% in April-July 2023 compared to May-August 2022, and imports of decorations and other themed merchandise dropped by 3%.

Walmart, the largest retailer in the U.S., said in a call with investors that while strong jobs numbers and pockets of disinflation are helping shoppers, "rising energy prices, resuming student loan payments, higher borrowing costs, and tightening lending standards and a drawdown in excess savings" all point to a looming slowdown in spending.

Retail sales have been on a positive trend this year, however, even as high prices and rising interest rates weigh on discretionary purchases. July retail trade sales increased 2% from a year ago, and nonstore retailers — which captures online retailers — were up more than 10% from July 2022, according to the U.S. Census Bureau.

The National Retail Federation expects back-to-school spending to reach a record $41.5 billion this year, up from $36.9 billion last year. The previous back-to-school shopping high was $37.1 billion in 2021.

The high spending could be caused in part by higher prices across the board, from snacks to school supplies.

“This back-to-school season already is shaping up to be one where consumers overall spend more, but end up buying less,” Baird said in an emailed statement.

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Halloween Spending Gets Spooky as It Becomes Important Measure of Consumer Health