One year after the Inflation Reduction Act was passed, inflation remains sticky, leaving one industry expert predicting the economy is facing a “very difficult” season. Former Toys “R” Us CEO Gerald Storch warns that the upcoming holiday season will be challenging for retailers due to inflation. He points to various reports from retailers indicating a change in consumer behavior, with consumers becoming more reluctant to buy physical products. Despite a slight easing of pressure in some areas, such as the price decline of used cars and trucks, other price gains have proven to be persistent and stubbornly high.
Storch also highlights other areas of economic stress that consumers are facing, including rising interest rates when purchasing capital goods, increasing credit card debt, and the looming burden of student loans. Moody’s Analytics reports that Americans are spending $709 more per month on everyday goods and services compared to two years ago.
To combat inflation, consumers have shifted their shopping preferences towards value retailers. Storch mentions that Target’s sales declined by 5%, while TJ Maxx reported a 6% increase, indicating a shift towards bargain stores. This trend has been observed throughout history, where consumers opt for lower-priced options during tough economic times.
Despite the challenges faced by many Americans, President Biden has touted his economic policy, known as “Bidenomics.” However, on the one-year anniversary of the Inflation Reduction Act, Biden admitted that the act was more about providing alternatives for economic growth rather than reducing inflation.
It remains to be seen how the economy will be affected in the long term by Biden’s economic policy. Pulte Capital CEO Bill Pulte warns that the consequences of the current economic situation may only become apparent over the next several years. The impact of inflation and economic policies will eventually “bite” and have a significant impact on the economy.
Sources:
– Fox Business / Fox News