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

Retailers are chasing shoppers amid paradoxical dynamics, such as lower inflation, rising interest rates and pandemic-induced shocks to the way people live, work and shop.

This has made predicting consumer spending tricky.

“We’re dealing with massive imbalances in the economy and massive changes in spending patterns, investment patterns, supply disruptions, etc. And then all those shocks get reversed,” said senior US economist Aditya Bhave. Bank of America. “So that was a big challenge.”

A swirl of confusing trends is fueling a closely watched retail earnings season that could provide more clarity on consumers and the economy. Home Depot, Target and Walmart will start this week, followed by other major retailers like Lowe’s, Best Buy and Macy’s.

The reports come as sentiment about the economy is growing more optimistic. Economists at Bank of America and JP Morgan recently dropped calls for a recession this year. Wall Street investors have rallied behind calls for a “soft landing,” or the Federal Reserve’s successful attempt to slow the economy by raising rates and higher prices — but without plunging the country into a sharp economic downturn.

But concerns persist. Credit Suisse’s global equity strategist Andrew Garthwaite predicted in a note to clients last week. The US economy is headed for recession next year, dragging down stocks.

As the biggest U.S. retailers get ready to report earnings, there are four reasons why consumer spending and those companies’ sales are hard to predict:

Americans got some good news recently: Prices aren’t as high as they used to be. That trend may lead shoppers to shop for more needs than necessities.

The consumer price index, which tracks the prices consumers pay for a key basket of goods and services, rose 3.2% in July from a year ago, the Bureau of Labor Statistics said Thursday. That’s a more modest increase than the 40-year rate of inflation that consumers were dealing with a year ago.

Some brands have talked about lowering prices. For example, denim maker Levi Strauss CEO Chip Berg said in a CNBC interview last month that he would cut prices on about half a dozen items, including 502 and 512 jeans, by $10. More price-sensitive shoppers typically buy those items, he said.

Yet Americans still spend more of everything, even as wages begin to rise at a greater rate than prices. Those expensive items include necessities like groceries, houses, and cars. For example, according to an analysis of data from the US Bureau of Labor Statistics, in January 2019 prices for food at home increased by 25% compared to pre-pandemic levels.

Even Levi reflects that. The jeans, which are slated to sell for less, will sell for $69.50 after the markdown — up from the $59.50 they went for before the pandemic.

Questions about cooling inflation and price changes and how they will affect consumer spending are likely to come up during the analyst question-and-answer session during each retailer’s earnings call, said Michael Baker, retail analyst at DA Davidson. While slower inflation is good for consumers, even if a company sells the same number of units, retailers’ sales numbers will remain weak in the coming quarters.

The silver lining? If prices rise or fall by a small amount, consumers can spend more freely. Target, Walmart and Macy’s have said over the past few quarters that customers are avoiding big-ticket purchases like clothes and electronics, as they spend more on necessities.

Consumers can decide Play again just in time for the crucial holiday season, Baker said.

Many consumers may be pinching pennies — but shoppers are still racking up some big bills.

Americans’ credit card balances topped $1 trillion for the first time, according to new data released by the New York Federal Reserve last week. That raises new questions about whether consumers can continue — or even curtail — their spending habits at retailers’ stores and websites.

High debt can land people in trouble if they are unable to pay their balances every month and rack up interest charges. According to the Federal Reserve Board, the average interest rate on US credit cards has risen to nearly 21%. That’s a 6-point jump over the past 18 months, driven by rate hikes the central bank has used to control inflation.

On top of credit card balances, millions of Americans will resume student loan payments this fall. Those installments were frozen for more than three years due to the pandemic.

There is no need to panic, Bank of America economist Pavey said. Americans have bigger bills because inflation has driven up prices. But many are earning more than they used to.

Thanks to a tight labor market, Americans’ wages have risen significantly over the past two years. As inflation cools, growth in average hourly earnings has begun to outpace the rise Consumer Price Index no.

People may grumble a lot about high prices, but they still have jobs, Baker said. He called low unemployment “a big compensation that helped keep consumer spending down.”

From splashing out on Taylor Swift concert tickets to taking two-week trips to Italy, Americans are dishing out experiences after years of cohabitation at home.

Ask the airlines.

But what does this mean for specific retailers? American consumers are now spending more of their personal income on services and less on goods — a reversal of trends seen during the Covid pandemic.

Yet retail sales, while falling, are stronger than some feared.

“There’s no denying that sales are down, and one might think it’s not great, but I think it’s actually very healthy,” DA Davidson’s Baker said. “Nothing seems to be slow enough to fall off the table.”

He said the softening of retail sales could signal the U.S. is on track to avoid recession, as it could stop the central bank from raising interest rates further. Ultimately, this is good for both retailers and consumers, he said.

Nikki Baird, vice president of strategy at retail-focused software company Aptos, said she was surprised by the consumer backlash. Even as Americans juggle spending on dining out and vacationing, they still shop.

“I thought with all the retaliation going on, that would affect consumer spending on goods,” he said. “But I think they were [in a] That mentality of, ‘If I’m going to go on that ship, I need a new suit.'”

The pandemic has shocked purchasing patterns, but more ticket purchases are likely to come.

A new iPhone, a trendy outfit, or A broken dishwasher.

Retailers often get a bump when the season changes, when new products are introduced and old items break out. Still, the pandemic has disrupted regular shopping — and is messing with retailers’ sales methods even more.

For example, many Americans bought expensive and durable items such as kitchen appliances, furniture, and laptops when they had stimulus dollars in their bank accounts and stayed home longer. Now, consumers may be closer to renewing expensive items purchased during the pandemic, and that could be a boon for many major retailers.

Best Buy CEO Cory Barry said in late May that he expects less demand this year for the company’s big-ticket electronics. But he hopes the replacement cycle will resume next year.

In the near term, two seasonal factors may help. Retailers including Walmart and Target can get a bump from early back-to-school spending — especially as college students get headboards, coffeemakers and more. Home Depot and Lowe’s have passed spring, the holiday season for home improvement when homeowners spruce up yards and contractors take advantage of the better weather.

The ripple effects of the pandemic will still affect retailers’ outlook throughout the year. Government stimulus dollars served as a lifeline for many and spurred discretionary purchases for others. The per capita savings rate in the U.S. is less than half of what it was before Covid, with Americans withdrawing money early in the pandemic and then feeling more financially secure due to a tight labor market..

The suspension of student loan payments may have supported higher levels of discretionary spending over the past three years, Bird of Optos said. As those payments resume this fall, it could factor into retailers’ forecasts later in the year.

— CNBC’s Leslie Josephs, Jeff Cox and Gabrielle Fonrouge contributed to this report.