The pandemic has yet to be defeated, but — after an extremely difficult year defined by a deadly disease, a weakened economy and debilitating uncertainty around both — the U.S. appears to be turning the page, thanks to a swift vaccine rollout and government-issued financial relief.

Household savings in the first quarter of this year topped 20% of disposable income in the U.S., compared to the country's typical savings ratio of closer to 9%, and net wealth among U.S. households "increased notably over the course of the pandemic," according to Cailin Birch, global economist at The Economist Intelligence Unit.

"All of this suggests that the economy is headed for a strong recovery in 2021," she said by email.

It's not just economists; consumers have been feeling that way too. In early April, the University of Michigan Surveys of Consumers measure of consumer sentiment "rose to its best level in a year on the strength of recent gains in current economic conditions." That, in turn, is lifting many retailers, which are emerging with some strength and cause for hope as preparations for the holiday season begin.

That doesn't mean that last year's uncertainty has been vanquished, however, Birch and others warn.

Consumer confidence is a little unstable

Recent studies show that consumer confidence may be wobbly or, for some, not registering much at all. 

In the same April survey, the Michigan researchers found that confidence in the future was tempered by ongoing worries about the pandemic and emerging inflation concerns, for example. In May, the Ipsos-Forbes Advisor U.S. Consumer Confidence Tracker found sentiment wavering, with weakening expectations around jobs.

"Our overall consumer confidence index rating is near where it was at the point of the first lockdown last year, and consumer confidence has clearly rebounded since January," Mallory Newall, Ipsos director of U.S. public affairs, said by phone. "But I think that's only telling part of the story. Our most recent report shows some softening, particularly regarding jobs and expectations sentiment. So that tells me that Americans' outlook on things like their personal financial situation, job security and expectations for the future are very much still in flux."

Wells Fargo economists in a May report similarly detected what they called "a modest decline" in consumer confidence from April to May.

"To be sure, there is still a trend improvement from the ... reading back in January, but by any reckoning the rebound has lost momentum," Wells Fargo Senior Economist Tim Quinlan and Economic Analyst Sara Cotsakis wrote May 25, also noting that some concern about the future is surfacing. The index measuring sentiment around consumers' "present situation" reached a post-pandemic high, "but the fact that the forward-looking expectations component fell below 100 for the first time since February muddles the picture," they also said.

That could complicate the outlook for retailers, especially as consumers increasingly spend their money on services and experiences. 

"Our best read is that a scarcity mindset and worries about inflation could rattle confidence for a while, but not enough to sully our expectations for robust consumer spending in the coming months particularly in leisure categories, which have the most room for growth," the Wells Fargo team said.

Some are more confident than others

The wealth gap that has sapped consumer spending power for years existed well before the pandemic. Despite the governmental pandemic relief packages that even at the local and state level often included extra help for lower-income households, economic inequality in the U.S. remains stubbornly in place.

"Our latest consumer confidence data that was just released [May 20] shows that there's still a fair amount of uncertainty about the country's economic situation," Ipsos's Newall said. "And we're seeing that combined with an unequal recovery, where certain groups are more at risk to kind of carry forward the burdens from the past year. That's low-income Americans, people of color, mothers who have kids in the household."

Moreover, in research released earlier this year, AlixPartners found, along with some optimism thanks to the development of vaccines against COVID-19, high levels of anxiety around health and finances, particularly in the U.S. Even households that on paper are doing well are often under financial stress, and the pandemic only added to that.

"For middle-class families, there's always been anxiety around health, jobs, school," Joel Rampoldt, a managing director in the retail practice at AlixPartners, said by phone. "And — health, jobs, school — those are the things that were impacted by this pandemic directly, hitting exactly where we were already primed to be anxious."

It's hard to know how much the rebound being seen in consumer spending, and consequently in retail, will endure, according to Rampoldt. The situation will be especially difficult for any retailer hoping to cater to the middle class, he said.

"There's a big chunk of people out there who are really concerned, who don't feel like they have the difficulties of the past year or even the past many years behind them yet," he said. "And so I just don't know how all of that is going to balance out. We have thousands of stores opening — they're mostly dollar stores. And at the same time, the other [luxury] end is continuing to do very well. It's in the middle where we really see the struggle. Retailers not on either extreme and maybe a little bit less differentiated, those are the ones who have been struggling and are going to continue to do so."

The pandemic has introduced new uncertainty

The pandemic has also initiated or sped up trends like e-commerce growth, the decline of the mall, the rise of working from home, and demographic shifts — ensuring that there's no real "return to normal," not for consumers or for retailers.

Researchers at First Insight say their studies indicate that spending patterns may be undergoing a long-term shift, with consumers "not quite ready to begin spending at pre-pandemic levels." Fifty-nine percent say they still expect to cut back on spending compared to before the pandemic, only a slight improvement from last year's 62%.

"Retailers may be encouraged by the green shoots they are seeing now that many places are reopening, but it would be foolish of them to assume that everything will magically revert to the way things were in 2019 or early 2020," First Insight CEO Greg Petro said in a statement, noting sticky concerns about how the pandemic is impacting personal finances and even store safety. 

Uncertainty remains, but "it's a different sort," according to Shannon Warner, a partner in the consumer practice of Kearney. A more comfortable level of certainty may not emerge until 2022, she said.

"It's not the same fear that we had last year when this notion of uncertainty started to pop up," she said by phone. "But there's a lot of newness and change that has brought a different sort of uncertainty that will continue through this year. I think by next year we'll get back to more of a level playing field, the 'new normal,' to use the phrase that was overused last year. But I think it will take some time for certainty to come back into the general feeling of consumers in America."