Inflation: A ‘retail ice age’ is emerging, expert says

Strategic Resource Group Burt Flickinger joins Yahoo Finance Live to discuss how retail shoppers are resisting inflationary price pressures, trends in consumer goods, and production slowdowns from China impacting electronic sales.

Video Transcript

BRAD SMITH: We've got Burt Flickinger, who is the Strategic Resource Group managing director. Burt, great to have this conversation here with you today.

And so under inflation and feeling this in a different way, where does it show, where does the data show that shoppers are spending more of their money right now?

BURT FLICKINGER: Brad, there's an accelerating inflationary retail ice age. So all retail categories are inflated in the US Department of Commerce report this morning. So it was up 3/10 of a percent overall. To your point, there were a couple standouts, clothing, but that's primarily because during COVID, record weight gains of men, women, and children, so people need larger sizes.

But what's really alarming, Brad, is that internet sales were down month over month and grocery and health care sales were down month over month, despite the UN reporting worldwide food inflation of 21% over the last year. So real cause for concern and very probably a pronounced retail recession as we get into the fourth quarter this year and the new year next year.

BRAD SMITH: I was told that it was a good weight that I was putting on, so it feels like a personal attack with the new sizes there, Burt. But at the end of the day, when we think about where some of those products are that they might be thinking about holding off on, and consumers are picking and choosing between categories, is there one category that has more pricing power than another right now?

BURT FLICKINGER: The categories that have the most pricing power, Brad, are food and consumables more than wearables. And to your point of postponing purchases, we saw electronics being down as a category today. People are postponing purchases until the new generation of excellent consumer products come out for BTS, or back to school, this year. We're also seeing consumers postponing purchases of appliances and being very cautious and buying both used cars and new cars.

So caution across the board. And if the proverbial great Eddie Grant Electric Avenue, the great musician and philosopher of the people, working so hard like a soldier, can't afford a thing on TV, can't afford to feed the kids. That's the summary of inflation and the real cause for concern in terms of consumer spending and affordability of the key categories you're referencing.

BRAD SMITH: Burt, I want to break down two of those things that you just mentioned, and a great quote there at the end as well, significantly applicable here on the discussion. But particularly, starting things off with consumer electronics, how does this change the cyclicality that investors have come to expect when we evaluate technology companies that always have their production numbers that they are perhaps not just reporting but that investors are forecasting and baking that in to determine what is a normal cycle or a super cycle? How does the consumption habits that we're tracking right now change the cycle?

BURT FLICKINGER: Brad, very prescient insights on your part, as always. And the consumer electronics purchase cycle will really be led by innovation. Apple, as always, others, and then Nvidia and Broadcom and others, as you've reported well. But it's also you and EP, great EP Rachel Sherman have teamed up to report, it's also getting the chips out of the People's Republic of China, which [? Rochelle ?] has reported very well over the years too. And even with innovation, supply chain snafus and delays and stoppages really can impair consumer electronics as well as autos, as you guys have reported well. So it's really up to the supply chain. And the supply chain is as bad this year as it was last year, and probably will be till the end of this year.

BRAD SMITH: Burt, while we have you, you mentioned automobiles as well. How has this altered what consumers are willing to pay for value? Because that is what consumers are looking for at the end of the day, a valuable, not just purchase experience, but a valuable product that's going to stand the test of time as well.

BURT FLICKINGER: Brad, on your important point, the best way to invest in autos is really used cars, through O'Reilly Auto Parts, AutoZone, and Advanced Auto Parts, which are three of our real Flick's Picks for Yahoo Finance, as well as BJ's Wholesale Club, Lowe's, and Target, too, where consumers get great quality and value in terms of both new products and in the case of the auto parts aftermarket, pre-owned products where consumers get a better life cycle out of cars and trucks and transportation and a better value, to your key point.

BRAD SMITH: Burt, always a pleasure to have the conversation with you. Appreciate the time and insights here today. That's Burt Flickinger, who is the Strategic Resource Group managing director, joining us here.