• by Sarah Mahoney  @mahoney_sarah, September 27, 2006

While the housing slump may still be casting dark shadows over many retailers (Lowe's, for example, lowered its earnings forecast yesterday), plenty of stores aren't a bit scared about October: The National Retail Federation expects a boo-ming Halloween business.

The NRF predicts consumers will spend $4.96 billion this Halloween, up significantly from just $3.29 billion a year ago. And more Americans will be celebrating--nearly two-thirds will mark the holiday somehow, compared to 52.5 percent that celebrated in 2005, with an average per-person spending of $59.06.

Why the new appeal of such an old holiday? "Retailers have been working extra hard to promote this holiday with ads and merchandising," said P.K. Kannan, Harvey Sanders Associate Professor of Marketing at the University of Maryland. "Retailers have been trying to get consumers in the mood to stretch out the holiday sales, rather than wait for it all to occur between Thanksgiving and Christmas. So Halloween is increasingly seen as the official start of the holiday season and mood."

Experts say the real change is in home décor. Halloween continues to be the second-biggest decorating holiday of the year after Christmas, and this year, 67 percent of consumers plan to purchase Halloween décor. Some 49 percent plan to decorate either their home or their yard. Kannan calls the decorating craze "social contagion. People see other people decorating their houses and having fun, and soon they get the fever and emulate their neighbors."

K mart, for example, is expecting big sales of its 8-foot inflatable globe, featuring swirling ghosts and a life-sized grim reaper--a Halloween version of the popular lawn-sized "snow globes" found in yards during the Christmas season.

Costco, however, has cut back on its Halloween décor items. "Candy will be huge, of course, and we do costumes, but in terms of décor, except for a few lights, we low-key it," says a spokesman. Those costumes are predicted to a bigger business than ever. The NRF said yesterday that it expects the most popular costumes for kids to be princesses (4 million kids), pirates (1.7 million) and witches (1.7 million.)

Overall, 34 percent of adults dress up, too, with the highest percentage (62.8 percent) in the 18 to 24 crowd. For adults, the winners are witches (6.2 million), pirates (1.3 million) and vampires (1.3 million).

And this year, even the dogs are putting on the dog: Pet costumes are expected to be hot, whether it's a Princess Leia get-up at Target or the Bumblebee look at Petco.