After the wrenching, pandemic-induced stop of 2020 and the strong economic bounceback in 2021, there have been hopes that this yr would mark the return to something like moderation, a sort of normalcy. 

Those hopes didn’t make it into the spring — they usually may need been a bit pie within the sky anyway.

Coming into 2022, retailers were coping with pandemic induced supply chain back ups that, yes, drove prices up but were seen by many experts as a passing effect of the pandemic. 

Just how rosy that view was is a matter of debate, but when Russian President Vladimir Putin invaded Ukraine in February, hopes of any sort of normalcy faded with the fact of a land war in Europe.

The continued war has proven to be a human and geopolitical nightmare that pushed a still-fragile global economy toward the sting. Each food and fuel prices spiked as Russia and the Ukraine, backed by the West, squared off. 

The inflation that was imagined to be transitory began to hit hard — and was made all the more serious by the lingering supply chain back ups and the choice by many retailers to top off after leaving money on the table last Christmas. 

The U.S. Consumer Price Index began the yr with a 7.5 percent increase in January and peaked at 9.1 percent in June — levels not seen since Ronald Regan was president. Inflation in Europe surged even higher, topping 10 percent within the U.K. and a few countries of the European Union.

While American shoppers still spent at first, flush from fiscal stimulus and a powerful job market, some began to collapse by midyear and, not surprisingly, it was Walmart Inc. and Goal Corp. feeling the beat back first. 

“U.S. inflation being this high and moving so quickly, each in food and general merchandise, is unusual,” said Doug McMillon, Walmart’s chief executive officer, in May. “We’ll control what we are able to control, reduce our inventory level and keep prices as little as we are able to, especially on opening price point food items, while improving our profit performance. Inflation is playing a job in the highest and bottom line and the pace of change created a timing issue for us.” 

The summer became something of a waiting game with merchants catering to lower end consumers scrambling while mid- to higher-end shoppers kept spending. This was very true in the posh sector, where Americans flocked to Europe as if it were their backyard — spending freely because of a dollar that at one point almost reached parity with the pound and the euro.

Big spenders went on spending, but middle class shoppers and people considered affluent, but not wealthy, began pulling back in October, across the time heavy hitters on Wall Street began warning of harder times ahead. 

Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., said U.S. consumers and businesses were actually holding up pretty much in the autumn, nevertheless it was his note of caution that drew attention.

“Consumers have money,” Dimon said. “Fiscal stimulus, they still have greater than they’d before. They’re spending 10 percent greater than last yr, 35 percent greater than pre-COVID-19. Their balance sheets are in great shape…even when we go into recession, they’re going to be in higher shape than in ‘08 and ‘09. Corporations are in fine condition.

“But you may’t talk in regards to the economy without talking in regards to the stuff in the longer term,” he said. “And that is serious stuff. That is inflation…it’s rates going up…it’s the war. These are very serious things, which I feel are prone to push the U.S. and the world. I mean Europe is already in recession; they’re prone to put the U.S. in some sort of recession six to nine months from now.” 

Since Dimon — and plenty of others — began warning of harder times and more consumers saw those harder times in their very own lives and weekly spending, the specter of recession has hung over the market. 

In November, food prices within the U.S. were up 10.6 percent from a yr earlier, while energy prices were up 13.1 percent, including a 65.7 percent gain in fuel oil. Apparel prices rose, too, but with a much milder 3.6 percent gain.

That pressure little doubt contributed to a weaker than expected showing for retail sales in November.

Total retail and food service sales fell a seaonally adjusted 0.6 percent last month, compared with October, because the year-over-year gain got here in at 6.5 percent. 

Apparel and accessories specialty chains saw sales fall 0.2 percent from October and inch up just 0.7 percent from a yr earlier, while malls were down 2.9 percent from October and three percent from a yr earlier. 

It’s a retail market where even winning could feel like losing. 

While the National Retail Federation is projecting a vacation sales gain of 6 percent to eight percent this yr, inflation — although down — was still running at 7.1 percent in November, in accordance with the Labor Department’s Consumer Price Index. European inflation also slipped but was still in double digits.

That has price increases effectively eating Christmas. 

And the psychology of spending is starting to vary, not less than within the U.S. 

A study last month by Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, said a yr and half of high inflation “has shaped consumer views toward their funds in addition to the economy, contributing to the all-time low recording of sentiment this summer.” 

“Throughout 2022, consumers have expressed how inflation has eroded their living standards, closely tracking the proliferation of negative news they hear about inflation,” Hsu said. “We will now see the results on behavior as well: a majority of consumers have adjusted to their expectation of continued inflation by adjusting their spending. Furthermore, a fair larger share of consumers are planning spending cuts within the yr ahead. Their attitudes toward [drawing down savings] and borrowing suggest that this future spending response could also be amplified as consumers draw down their savings.”

The Federal Reserve, led by chair Jerome Powell, has been ratcheting up rates of interest to bring inflation down — which suggests cooling off the economy with a weaker job market and fewer spending, but that continues to be seen as higher than letting price increases run wild as they will tackle a lifetime of their very own.

Last week, Powell said, “We’re taking forceful steps to moderate demand in order that it comes into higher alignment with supply… Reducing inflation is prone to require a sustained period of below-trend growth and a few softening of labor market conditions… We are going to stay the course, until the job is completed.”

Powell described how consumer spending has slowed as real disposable income sank, how the housing market weakened significantly and the way higher rates of interest are weighing on business investment. 

However the labor market has held on, which suggests the Fed has more work to do if it’s going to essentially tamp down inflation. European central banks, meanwhile, face the same quandary and last week all of them boosted rates according to the Fed’s move to achieve this. While observers a yr ago were talking about rates of interest of 1.5 to 2 percent, now some are wondering whether global rates could go as high as 6 or 7 percent before inflation is tamed.

“Despite the slowdown in growth, the labor market stays extremely tight, with the unemployment rate near a 50-year low, job vacancies still very high, and wage growth elevated,” Powell said. “Job gains have been robust, with employment rising by a median of 272,000 jobs per thirty days over the past three months. Although job vacancies have moved below their highs and the pace of job gains has slowed from earlier within the yr, the labor market continues to be out of balance, with demand substantially exceeding the provision of obtainable employees.”

A powerful job market normally has retailers turning cartwheels because individuals who have jobs spend, but right away it means even higher rates of interest for longer. 

Wall Street has felt every bump along the way in which, with the Dow Jones Industrial Average trading down about 9 percent for the yr going into the last week before Christmas.

Retailers might wonder what happened to a yr that started off so brightly in 2022. But they face even darker clouds in 2023.