The multi-million dollar word on every retailer’s lips right now is inflation. Despite the Inflation Reduction Act passing through the House and the Senate, and signed by President Biden, inflation is still poised as an issue for the state of the economy. CNBC recently reported that 70 percent of Americans are looking for extra work to combat inflation. Bloomberg reported that state sales tax receipts are declining as inflation hurts consumer spending. The Federal Reserve is also weighing on hiking interest rates again as a method of curbing inflation and bringing inflation down to 2 percent.

The effects of inflation are permeating businesses globally. Even the stock market slid deeper into a slump today, as recession fears grow. Inflation fears are unfortunately chipping away at the national outlook and affecting consumer confidence. When consumers think economic turmoil could strike at any moment, they typically buy less. It’s smarter to try and save when you think your job could disappear at any second. As a result, discretionary spending goes out of the window. Rising inflation means consumers also have less disposable income. With fall here, that means peak shopping season is just around the corner. By November and Black Friday, it’s easy to get a picture of how the retail economy is fairing.

Consumer Price Index is at a 40-year high

Year-over-year consumer prices have hit a 9.1 percent increase, a four-decade high. The sad truth economists and our government have to face is consumer spending has slowed. More adults in the U.S. are buying cheaper alternatives to the products they regularly purchase.

The particularly interesting thing about this economic situation is, unlike in past periods of inflation and recession, consumers haven’t pulled out of spending entirely. This is arguably a first-of-its-kind situation, where there’s a recession or borderline recession, and people are still spending money.

While Morning Consult found that 9 out of 10 adults report hearing something in the news about inflation, and over 60 percent have concerns about how inflation will affect their finances, there is hope yet. Food prices are starting to moderate, as measured by the price of bacon. Gas prices are also leveling off from their peak.

Rather than hoping consumers will just start spending money again or hoping the effects of the Inflation Reduction Act will take off soon, retailers are trying to offer consumers more affordable products. Going into the holiday season, retailers will likely discount more, but there’s hope for them still exiting the holiday season in the black.

Although very few people like inflation, it doesn’t exist in a completely negative vacuum. Pay raises might come for workers, for those lucky enough to get cost of living increases. Cost-of-living adjustments might also happen for pensioners. There is also evidence that wages after accounting for inflation are rising.

Still, inflation appears to outpace wage growth right now, and retired seniors who live on a fixed income are being hit particularly hard. It is not the easiest outlook for retailers with the state of inflation, but shopping will still happen. The best hope is inflation will be spread out over five years versus just concentrated into one giant recession, and the positive effects of the Inflation Reduction Act will be felt soon.