Four reasons why the consumer is so confusing — and what that may mean for retail earnings

High food prices. Low unemployment. And eye-popping spending on concert tickets and European trips.

Retailers are chasing shoppers as they navigate contradictory dynamics like cooling inflation, rising interest rates and pandemic-induced jolts to the way people live, work and shop.

That has made it tricky to predict consumer spending.

“We’ve been dealing with massive imbalances in the economy and big shifts in spending patterns, investment patterns, supply disruptions, all of that stuff. And then the reversal of all of those shocks,” said Aditya Bhave, a senior U.S. economist at Bank of America. “So that’s been the big challenge.”

The swirl of confusing trends tees up a closely watched retail earnings season that could offer more clarity about consumers and the economy. Home Depot, Target and Walmart will kick it off this week, followed by other major retailers like Lowe’s, Best Buy and Macy’s.

The reports come as opinions about the economy have grown more optimistic. Economists at Bank of America and JPMorgan recently scrapped calls for a recession this year. Wall Street investors have rallied behind calls for a “soft landing,” or a successful effort by the Federal Reserve to slow down the economy and higher prices by raising rates — but without tipping the country into a sharp economic downturn.

Yet concerns linger. Andrew Garthwaite, global equity strategist at Credit Suisse, predicted in a note to clients last week that the U.S. economy will head into a recession next year and drag down stocks.

As the biggest U.S. retailers gear up to report earnings, here are four reasons why consumer spending and those companies’ sales have become harder to predict:

Americans got some good news recently: Prices aren’t going up as much as they used to be. That trend may make shoppers go to stores for more wants rather than needs.

The consumer price index, which…