The economy delivered some bad news but mostly surprisingly good news for retailers last year. Consumer confidence was shaken by high inflation and the interest rate hikes intended to combat it, but consumer spending — and retail sales — remained remarkably robust. And as 2023 was drawing to a close, inflation was showing signs of ebbing, and the U.S. economy seemed headed for a soft landing instead of a recession. So what can retailers expect this year?

More good news and bad news, according to Deloitte’s “2024 Retail Outlook,” which foresees a year marked by a tight labor market, elevated long-term interest rates and persistent economic volatility.

On the plus side, Deloitte’s baseline economic forecast predicts a continuance of consumer spending growth, albeit at a pace trailing slightly behind GDP growth. This prediction is anchored in expectations of subdued inflation, robust employment levels and an uptick in productivity growth. However, the pandemic’s shadow looms large, reshaping consumer spending behaviors and setting the stage for a moderated growth path in durable goods spending over the next half-decade.

And while inflation is gradually cooling, the specter of rising prices continues to haunt three-quarters of consumers, who the report predicts will be more judicious in their spending this year. Retailers can expect that many of their shoppers will be exploring competitive offerings and prioritizing value to stretch their dollars further.

For retailers counting on their loyalty programs to bring in value-minded shoppers, the report offers more mixed news. Nearly two-thirds of consumers are enrolled in up to five loyalty programs, but engagement is elusive, and most actually use fewer than half of their memberships. Deloitte suggests that personalization, co-branding initiatives and effective data utilization could be the keys to reinvigorating these loyalty programs.

The report also underscores the critical role that customers’ in-store experiences play in generating loyalty. Three-quarters of consumers favor retailers that deliver consistent, high-quality customer service. Consumers are also increasingly looking for personalized experiences, and Deloitte notes that retail executives are counting on AI to help deliver them. But consumers tend to be leery of AI and the data collection that powers it, so the challenge will be to leverage the technology in a way that delivers value for consumers while maintaining their trust.

The upshot of all this is that 2024 will be a tricky year for retailers. Just like every other year.