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

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As Home Depot, Target and Walmart report earnings, retailers and investors have had to weigh contradictory factors as they predict consumer spending patterns.

, including 502 and 512 jeans, by $10. More price-sensitive shoppers typically buy those items, he said.

Questions about cooling inflation and price changes, and how they will affect consumer spending, will likely come up during the analyst question-and-answer session on every retailer's earnings call, said Michael Baker, a retail analyst for D.A. Davidson. Slower inflation, while good for consumers, will make retailers' sales numbers look weaker in the coming quarters, even if a company sells the same number of units.

Bhave, the Bank of America economist, said there's no need to panic. Americans have bigger bills because inflation has driven up prices. But many people also make more money than they used to. He said softening retail sales could signal the U.S. is on track to avoid a recession because it may stop the Fed from raising interest rates further. Ultimately, that would be good for both retailers and consumers, he said.

For example, many Americans bought pricier and longer lasting items like kitchen appliances, furniture and laptops when they had stimulus dollars in their bank accounts and faced long stays at home. Now, consumers may be closer to refreshing pricier items bought during the pandemic, and it could be a boon for many major retailers.for the company's big-ticket electronics. But she is hopeful the replacement cycle will pick up again next year.

 

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