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Pinched between poor back-to-school sales and a holiday sales season that is anticipated to be the worse in years is Halloween which generally brings retailers about $5 billion. This year will not be as good as last which may be telling when analysts look toward industry sales in November and December.

The Nations Retail Federation says, “consumers are expected to spend an average of $56.31 on Halloween, down from $66.54 in 2008.  That is a slide of 15%, and much of the retail industry cannot survive if holiday sales in last quarter are nearly as bad.

The retail industry is up against two barriers this year. The first is the reluctant consumer who is concerned about employment and has diminishing access to credit. The second one is the H1N1 flu which is spreading faster than many medical experts had expected. The strain is now widespread in 26 states, up from 21 last week. The level of infection could certainly peak during the next sixty days, which would be right in the middle of the height of the Christmas shopping season.

Holiday sales in 2009 may be as good a litmus test as any for how the consumer is doing and, by extension, the larger economy. Consumer spending is still close to 70% of GDP. The recovery depends on some improvement in the retail sector. It appears that recovery is not coming, which means that optimistic projections of GDP expansion are probably wrong.

Douglas A. McIntrye