One year after the implementation of the Inflation Reduction Act, the persistence of inflation remains, leading an industry expert to forecast a challenging period for the economy ahead.

Gerald Storch, former CEO of Toys “R” Us, shared his views on the matter, predicting a demanding holiday season for most retailers in the upcoming fall.

During an appearance on “Cavuto: Coast to Coast,” Storch elaborated on the shifting consumer behavior observed through various retail reports.

“Retailers are consistently reporting that consumers are feeling the strain, hesitating to make purchases of goods. While spending on services continues, partly driven by pandemic-induced pent-up demand, when accounting for inflation, the sales of physical products have actually declined for 11 consecutive months,” Storch explained.

In the past week, the July consumer price index (CPI) experienced a 0.2% increase compared to the previous month, aligning with expectations.

Year-over-year, prices climbed by 3.2%, up from June’s 3% but slightly below the 3.3% projection by Refinitiv economists. This marked the first acceleration in the headline figure in over a year, highlighting the persistent challenge of managing elevated inflation.

“It’s far from being resolved,” remarked Bill Pulte, the CEO of Pulte Capital, during the conversation with Storch. “I believe we’re currently in a phase of stagflation, where there’s a combination of sluggish growth and considerable inflation. Let me tell you, we’re observing the needs of the American population every day on platforms like Twitter and now X. People are facing more difficulties than ever, struggling to cover housing and medical expenses. Inflation is still prevalent, and in my opinion, we’re just at the beginning stages.”

Persistent inflation isn’t the sole challenge affecting consumers, as Storch pointed out, highlighting additional economic stressors.

“Beyond grappling with inflation, consumers are grappling with the impact of rising interest rates whenever they make significant purchases like a car or their home. Moreover, credit card debt is on the rise, indicative of people resorting to high-interest credit cards. And, with rising rates, credit card debt interest rates escalate as well. This means they’re using the most expensive form of capital to acquire essential items in their lives. Lastly, the looming student loan crisis is another hurdle.”

For consumers, July did provide some relief. The cost of used cars and trucks experienced a decline of 1.3% during the month, with a year-over-year decrease of 5.6%. Airline ticket prices also plunged by 8.1% in July, following a trend of declines in April, May, and June.

While some areas experienced a slight alleviation of pressure, persistent and significantly elevated price increases persisted in other sectors throughout July. Housing expenses, constituting around 40% of the core inflation rise, saw a 0.4% uptick during the month and have surged by 7.7% over the past year. The Labor Department attributed 90% of the inflation surge last month to the escalated housing costs.

As per Moody’s Analytics, Americans are now expending an extra $709 per month on daily necessities and services compared to their spending two years ago.

In the battle against inflation, consumers have strategically adjusted their shopping habits, gravitating towards value-oriented retailers as they navigate their budget constraints.

“[Consumers are] gravitating towards value-oriented retailers,” pointed out Storch. “For instance, Target reported a noticeable decline in sales, around 5% for a retailer of its size. This is a significant impact to witness in terms of comparable sales drop. In contrast, TJ Maxx reported a 6% increase. This signifies an 11-point disparity in the retail landscape. TJ Maxx is synonymous with budget shopping. When Walmart presents its report tomorrow, I anticipate it will also show a positive trajectory.”

Storch contended that these reports vividly demonstrate the consumer’s inclination toward lower prices rather than higher-end stores or premium brand names.

“History has provided evidence since 1961, when Walmart, Target, and Kmart all commenced operations in the same year, that during challenging periods, consumers flock to Walmart. During prosperous times when there’s more disposable income, they tend to prefer Target. The Target-Walmart disparity essentially provides insight into consumer sentiment,” he emphasized.

Despite the tangible experiences of numerous Americans, President Biden has continued to champion his economic policy, which has been dubbed “Bidenomics.”

On the one-year commemoration, Biden lauded his economic achievements while also conceding that the Democrats’ flagship Inflation Reduction Act wasn’t solely aimed at mitigating the nation’s then-record-high inflation, contrary to what he initially conveyed to the public.

“I wish I hadn’t named it that way. It’s not so much about directly lowering inflation as it is about introducing alternatives that foster economic growth,” Biden remarked during an appearance at a campaign fundraiser in Park City, Utah, according to the press pool report.

While harboring skepticism about any politician claiming mastery over debt management, Pulte pointed out the impending repercussions of Biden’s economic policy.

“I believe we have a considerable journey ahead. President Biden is in office now, but he might not witness the consequences that will unfold over the next five, ten, or even twenty years. When you delve into the compound math of this predicament, you realize the effects will accumulate slowly but surely. Yet, when they do materialize, as we’ve come to realize over the past few years, they will have a substantial impact,” Pulte cautioned.