The biggest U.S. retailers released their quarterly earnings this week, which kicked off another round of speculation from economists and market watchers about whether the economy is headed for a recession, already in one, or maybe just finishing one up. But par for the course in this weird and wacky pandemic-era economy, clear-cut answers were once again hard to come by amid a jumble of mixed messages. 
Starting with the top-line number of the week, retail sales in July were flat, according to the latest Commerce Department data. While economists rarely celebrate zero growth, many interpreted the reading as a sign that spending was holding strong despite a 40-year high in inflation. In addition, another measure cutting out gasoline and auto sales jumped 0.7 percent. This suggests that consumers held off on buying gasoline and cars due to higher prices, which freed up money for other kinds of spending. 
The retail data is just the latest economy-wide reading to complicate the ongoing recession debate. Within the past 30 days, Americans have gotten a slew of contradictory economic data at a whip-lash pace. Gross domestic product was down for the second consecutive quarter (a bad thing). The U.S. added 528,000 jobs in July (a good thing), and the consumer price index was flat in July (not a bad thing?).  Meanwhile, the housing market has fallen off a cliff: Construction spending, housing starts, and building permits all declined, despite the fact that there's a nationwide shortage of homes. 
With all this ambiguity, many were hoping that this latest batch of retail earnings would paint a clearer picture. Alas, the results were decidedly more uneven. 
Sales at Walmart, for instance, were up 8 percent, but profits were down. This is because the retailer is overloaded with inventory, particularly apparel, and now has to mark down products to clear them off shelves. At one level, this has more to do with Walmart's business strategy than the overall economy. But putting aside profit margins, the shift shows that consumers are still buying stuff, just not the same stuff as before. In 2021, customers shelled out for big purchases of general merchandise. Now, inflation is forcing consumers to prioritize their spending on essentials such as food and gas. For Walmart, that meant that its grocery division was pulling more weight than usual. 
The story was similar for Target. The company is slashing prices left and right to clear its excess inventory as quickly as possible. This is squeezing profit margins, but it's not necessarily a sign that the economy is hurtling toward a recession. While shifting consumer behavior due to inflation explains part of the inventory glut, both Walmart and Target over-ordered items to make up for shortages earlier in the pandemic. That was an industry-specific flub, not necessarily a sign of a coming economic apocalypse. 
Indeed, too much inventory isn't always a bad thing, and both companies hinted that the glut would soon be cleared. "We like the fact that our inventory is up because so much of it is needed to be in stock on our side counters, but a 32 percent increase is higher than we want," said Doug McMillon, CEO of Walmart, during an earnings call this week. "We'll work through most or all of the excess inventory over the next couple of quarters. Echoing these comments, Target CFO Michael Fiddelke said "the vast majority of the financial impact of these inventory actions is now behind us." 
Home Depot, meanwhile, reported higher-than-expected sales. The company said that, despite the fall-off in housing construction, home improvement projects continue apace. 
"Despite near-term uncertainties, we believe that the long-term underpinnings of demand for home improvement remains strong," said Home Depot CEO Ted Decker during an earnings call. 
That about sums it up: short-term uncertainty, but tentative long-term optimism.