Halloween's Effect on the Economy

Even though Halloween is just a single day, as a holiday it is nonetheless responsible for a great deal of consumer spending on everything from costumes and makeup to candy and party supplies to (of course) pumpkins.

Based on the Keynesian school of economic thought, major spending holidays can have significant and positive short-term benefits for the economy by encouraging extra purchases that might not otherwise occur. Indeed, according to the National Retail Federation (NRF), in 2021, Americans spent a record $10.1 billion on Halloween, the second biggest retail event of the year.

Let's see how this all adds up.

The Economy's Impact on Halloween Spending

It could be argued that the state of the economy affects the Halloween industry more than Halloween affects the state of the economy. In a down economy, for instance, consumers may be less likely to spend on frivolous goods such as costumes, candy, pumpkins, and home decorations.

With significant inflation throughout much of 2022 and lingering concerns about a recession, it's possible that Halloween 2022 spending will be somewhat depressed. Still, despite the COVID-19 pandemic still being in full force, in 2021 a record amount of Halloween cash was raked in by businesses, with customers spending more than $10 billion, $3 billion of that on Halloween candy and $3.32 billion on costumes. The NRF predicts that participation in Halloween activities will return to pre-pandemic levels for 2022.

Many economists believe the increase in spending around Halloween has a positive effect on the economy. Increased spending generally leads to higher gross domestic product (GDP), helping to jump-start economic activity and lead to potential job growth.

It is entirely possible, however, that the net positive effects of Halloween consumer spending are offset by net negative effects elsewhere. For example, some consumers might anticipate an increase in spending around late October and, to compensate, increase their savings during the preceding months. This could lead to reduced gross spending during August and September. Others might curb their spending in November, both to compensate for increased spending for Halloween and in expectation of Christmas spending.

Employment and Commercial Activity

Halloween also has a seasonal impact on employment and commercial activity. The NRF expects 69% of consumers will celebrate the holiday in 2022, each spending an average of about $100.45 on items, costumes, and candy. 2021 marked the first time that average spending on Halloween had moved above $100. For those interested in how the spending is broken down, in 2022 consumers are expected to spend $3.6 billion on costumes, $3.1 billion on candy, $3.4 billion on decorations, and $600 million on greeting cards.

Many retail stores open only for Halloween and, when November arrives, these shops close and wait patiently for the next season. Some industries expect and plan for large increases during the late-October holiday, including pumpkin growers and candy production companies.

Special Considerations

Some economists argue spending on seasonal consumer goods such as costumes and decorations diverts resources from more productive activities because they are only used for one day of the year. If people save less as a result of holiday spending, the total capital investment stock is worse for it. The receipts of companies that employ people full-time year-round may also drop because more dollars are chasing seasonal goods.

Others have argued Halloween is full of payments-in-kind (PIKs), such as costumes or candy, rather than lump-sum transfers, such as cash, and that in-kind payments are more inefficient in satisfying consumer wants. After all, you can buy whatever you really value most with cash, whereas it is unlikely that your candy bar is your most valued good.

The Bottom Line

Economist Jeffrey A. Tucker argued in his 2009 article for the Ludwig von Mises Institute that Halloween teaches valuable economic lessons that could have very long-term benefits: children should work for their rewards, bartering is an option, and appearance matters. But the most accurate answer is probably this one: Halloween is a substantial industry with a significant impact on the U.S. economy. For now, it is still very difficult to identify exactly what that impact is and whether it is a net positive.