December is the most important month of the year for Hyde Park boutique The Silver Room, where planning for the holiday season begins in September.

Holiday shoppers come to buy gifts ranging from smaller, last-minute items such as coffee mugs or candles to bigger-ticket pieces, such as jewelry.

The boutique isn’t quite as busy as it was two years ago, owner Eric Williams said. “Folks were at home, they had extra money, they had government money,” he said. “They were not going downtown.”

Still, sales have more or less recovered to pre-pandemic levels, and Williams thinks people will be ready to spend this winter. “I think the economy actually isn’t as bad,” Williams said, “as we were told it was going to be.”

Last year, major retailers slashed prices early in the holiday shopping season, anticipating shoppers would pull back from nonessential shopping as they struggled with sky-high inflation.

This year, inflation flattened from September to October, with prices up 3.2% from the year prior, according to the Bureau of Labor Statistics. Job growth slowed, but the unemployment rate stayed low at 3.9%. Average hourly earnings were up 4.1% over the year.

But despite slowed inflation and good employment numbers, some small business owners told the Tribune shoppers were still struggling with sticker shock.

Elena Duran, owner of Artesanias Elena on 26th Street in Little Village, said she was only making her business work because she owns the store building, where she also lives. Business has been slower than last year, she said; the store makes enough to cover its bills, but not much more.

Duran sells treasures she scouts from artisans in Mexico, such as ceramic talavera jewelry and miniature nativity scenes made of plaster of Paris. On her last trip to the country, in September, her dollar was worth 17 pesos. Last year, she got 22 pesos on the dollar.

At home in Little Village, neighbors who visit her store tell her it’s their rent that’s costing them the most, Duran said. Rents continued to rise in October though inflation overall was flat.

“I’m not selling milk, and I’m not selling bread,” Duran said. “People come here for things that they want — they don’t need, they want. And I understand.”

Colin Brennan, co-owner of Record Breakers in Avondale, said the record shop needs holiday sales to propel itself through January and February. Supply chain issues have caused record prices to continue to climb, he said, and he’s started to notice more sticker shock from shoppers over the last six months or so.

“A Lana Del Rey old record like ‘Born to Die’ retails at $30 now when pre-pandemic we were selling it at $20,” Brennan said. “It costs us now more than we used to sell it at to have it in the store.”

Brennan said he didn’t think sales at Record Breakers had ever fully recovered to pre-pandemic levels. It’s harder to take a risk on stocking niche records or lesser-known artists than it was in the past, Brennan said.

“A lot of our customers before were in the neighborhood, and industry people — you know, servers, bartenders, musicians,” he said. “So we do really well not only on the weekends but Mondays and Tuesdays on their days off, and haven’t really seen that come back.”

Publishers are still raising book prices, said Shane Khosropour, manager at Unabridged Bookstore in Lakeview. But holiday sales were strong last year, and he expects this year to be at least as good or better.

“It’s still a little too early to tell,” how inflation — or perceived inflation — would affect sales this year, he said.

Khosropour said the bookstore had largely recovered from the pandemic.

“COVID hurt us but also in some ways helped us, because people turned to books more and there was a lot of this culture of supporting your local independent stores — which we’ve definitely seen wane a bit,” he said.

That’s been cushioned by the fact that some customers the bookstore gained during the beginning of the pandemic have remained loyal, Khosropour said.

According to the National Retail Federation, holiday sales grew 5.3% in 2022. The retail group has predicted more modest growth this year, estimating retail sales would grow 3% to 4% over last year.

NRF President Matthew Shay said on a media call Tuesday there was “a difference between moderation and bleak.”

“Some might observe that simply because you’re going from 12 or 6 or 8 or 7% growth to 3 to 4, then that’s bleak, but on a historic basis 3 to 4% growth is very in line and frankly slightly above trend of the last 10 years before the pandemic,” he said.

About 59 million people shopped in stores the Saturday after Thanksgiving this year — down from more than 63 million last year — with 78% of them shopping specifically for Small Business Saturday, according to the organization.

Meanwhile, online shopping continues to grow. According to Adobe Analytics, shoppers spent a record $9.8 billion online on Black Friday, up 7.5% over the year, with total Cyber Monday spending hitting $12.4 billion, a 9.6% jump.

Out of about 400 Chicago-area residents surveyed by Deloitte this year, 22% said they planned to do some of their holiday shopping at local independent stores, compared with 60% who say they’d shop online and just over half who said they’d shop at mass retailers.

The Chicago shoppers said they planned to spend 6% less during the holidays overall than they did last year.

At the same time, consumer confidence rose in November after declining for three consecutive months, according to the Conference Board, a business research group.

Even economists are having a difficult time making sense of prices and the economy, said Peter Bernstein, chief economist at RCF Economic & Financial Consulting in Chicago.

“You have individuals who are buying all kinds of different things,” he said. ”They notice things that have gone up in price, maybe they don’t notice things that haven’t. And so even for them, it’s difficult to get a good assessment of their standard of living.”

And consumers who say they plan to pull back may not actually do so when all is said and done, he said.

“There’s been a lot of pessimism regarding consumer spending for a long time that hasn’t materialized,” Bernstein said.

On one hand, said Jean-Pierre Dubé, a professor of marketing at the University of Chicago’s Booth School of Business, people are being told employment is high. “That should be good news,” he said.

At the same time, consumers are struggling with rising interest rates, meaning their big-ticket purchases are more expensive. People with credit card debt are seeing the interest rates on their debt go up too.

“That all gets combined with the fact that there has been a lot of inflation in prices. So our money just doesn’t go as far as it used to right now, or doesn’t feel like it does,” Dubé said. “For the small business, that’s gonna mean they’re really going to have to find a way to stand out from the crowd.”

Anthony Qaiyum, president of Merz Apothecary in Lincoln Square, said the business has had to get nimble.

Last year, the apothecary bought Kobo, a soy candle brand, in part because Qaiyum felt it needed to adapt to a hybrid business model that involves not only bricks-and-mortar and online retail but also manufacturing and wholesaling.

“My feeling is, I don’t think (retail) can be the only thing we do anymore,” he said.

“We’re bigger than we’ve ever been,” Qaiyum said, “and it’s a smaller margin than it’s ever been running a retail business.”

Still, Qaiyum said he expected strong holiday sales at the Lincoln Square shop, where the multilingual staff include an esthetician, certified herbalist, pharmacist and makeup artists.

“So much of what we do,” he said, “is around giving people the experience where they can come in and have an interaction that’s driven around knowledge, and passion, and some sense of authority around the products.”