The U.S. isn't in a 'typical recession': ex-Home Depot CEO

The news on Thursday that gross domestic product (GDP) contracted for two straight quarters intensified fears the U.S. is entering a recession. Earlier this week, former Home Depot CEO Bob Nardelli suggested the country has indeed fallen into a recession — albeit an unusual one.

In a wide-ranging interview for Yahoo Finance's "Influencers with Andy Serwer," Nardelli contended that the U.S. is still experiencing a downturn even though consumer spending has remained relatively high.

"I've said for months now that we are in a recession. We have had nine consecutive months of inflation," he said. However, he says, “It is not a typical recession that we are in."

While some economists argue that two consecutive quarters of negative GDP equals a recession, others point out that some hallmark signs of the "r" word are nowhere to be seen. Notably, unemployment currently sits near pre-pandemic lows at 3.6%. Meanwhile, the recent GDP report from the Commerce Department showed personal consumption rose last quarter, though it is starting to decelerate.

Airfare demand is also getting close to pre-pandemic levels despite an increase in fares.

“I think there's still some pent-up demands here where people are traveling right… you look at the airlines, and they're inundated with volume," said Nardelli, who also formerly served as CEO of Chrysler and as a high-level executive at GE.

Still, he points out that the soaring prices have made it difficult for airlines to maintain their operations. For instance, jet fuel prices have increased 90% since the beginning of 2022, according to McKinsey. Airlines also face a shortage of pilots and baggage handlers, among other workers. Consequently, airlines struggle to meet consumer demand.

“They just have a tough time servicing it, because of the employees because of fuel prices, because of people on the tarmac, baggage handlers just go down the list,” he said.

Nardelli also points out that Americans are getting less for their money. Inflation currently hovers at 9.1%, the highest in 40 years and production costs have increased considerably throughout various industries. To offset such costs, manufacturers often reduce the volume of their products, while keeping the price the same.

“When you walk down a grocery aisle. And you look at the price on there, you could see almost everything has gone up, right any core food product, or what have you has gone up. But what's happening now is you look at the price on the aisle,” Nardelli said. “And let's say it's $5. Well, it hasn't gone up since last week. What has happened is about a third less of the volume.”

This phenomenon, known as “shrinkflation,” has increased recently in the United States amid soaring inflation. For instance, Sparkle paper towels recently lopped off six sheets from every roll, going from 116 “pick-a-size” sheets to just 110, according to Consumer World, a website run by former consumer lawyer Edgar Dworsky. Meanwhile, Quaker Life reduced its cereal portions from 24.8 ounces to 22.3 ounces, while charging the same price.

“So, what. So, less ounces, less pieces, etc.” Nardelli said, “It's a deceptive, correct number, if I can say it that way.”

Nardelli says that shrinkflation isn't the only reason Americans might fail to see the consequences of inflation. He warns that Americans should be watchful of companies that report revenue increases, especially as prices shoot up.

Dylan Croll is a reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.

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