Spending, CPI, demographics of overall market

U.S. PET FOOD SPENDING $36.35B (↑$4.79B): MID-YEAR 2022 UPDATE

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The pandemic had a huge impact on consumers, including spending on Pet Food. We’ll do a more detailed historical review of recent years but at Mid-year in 2022 things finally seem to be returning to a more normal situation. Pet Food Spending for the 12 months ending June 30, 2022 was up $4.79B (+15.2%) from a year ago. Let’s put that into proper perspective. In pre-pandemic, Mid-2019 Pet Food spending was $28.90B. That means that the average annual growth rate from 2019>22 is +7.9%. This is 42% better than the average growth rate of +5.6% from 1984 to 2019. This industry segment is doing well. Of course, we’re starting to face what may be a new challenge – radically high inflation in Pet Food prices. Here’s what it was in mid-year 2022:

  • Mid-yr 22 vs 21: +4.0%
  • 2nd Half 21 vs 20: +1.6%
  • 1st Half 22 vs 21: +6.5%

You can see that the inflation rate in early 2022 was over 4 times higher than the rate in late 2021. It hit 10+% in June 2022 and continued at historic high levels. Prices in the 2nd half of 2022 were 14% higher than in 2021. Traditionally, “normal” inflation increases have had little impact on Pet Food spending. However, these increases are historic. We’ll get a better indication of their current impact when the 2022 yearend Pet Food spending numbers are released  in early September. I just wanted you to be aware of the situation as we review the mid-year data.

If inflation was 4.0% for Mid-Yr 2022, then 73.7% of the increase in Pet Food spending was real. Good, but not great. We’ll see what the situation looks like at yearend. Also, 59% of the $4.79B lift occurred when inflation was lower.

Now, let’s get started with our Pet Food spending update for Mid-Year 2022. As we stated earlier, Pet Food (& Treat) Annual Spending was $36.35B, up +$4.79B (+15.2%). The following charts and observations were prepared from calculations based upon data from the current CEX report and earlier ones. The first chart will help put the current numbers into historical perspective and truly show you the roller coaster ride that continues in Pet Food Spending.

Here are the current numbers:

Mid-Yr 2022: $36.39B; ↑$4.79B (+15.2%) from Mid-Yr 2021. The net gain of $4.79B came from

◦  Jul>Dec 2021: Up $2.85B from 2020.          ◦  Jan>Jun 2022: Up $1.94B from 2021.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, generally with 2 years up, followed by a flat or even declining year. This up and down “ride” was primarily driven by a succession of Food trends like Made in the USA, Natural and Super Premium”. The 2 yrs up then 1 yr flat/down pattern has been broken on a couple of occasions due to outside influences – the FDA grain free warning in 2018 and now the COVID pandemic in 2020. We may see another major influence on spending – recent skyrocketing inflation. The timing may be affected  but the Pet Food spending rollercoaster ride is likely to continue.

2013 was definitely a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013. The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food. As it turns out, 2014 brought out yet another new factor in Pet Food spending.

For over 30 years Baby Boomers were the leaders in Pet Food, both in spending and in adopting new products. Even in 2022, they still spend the most, but it turns out that the 25>34 yr-old Millennials led the movement to Super Premium in late 2014. The older groups, especially Boomers followed in 2015 and spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out that they were leading the way in another element of the trend to Super Premium – value shopping. The Boomers once again followed their lead and spending fell -$2.99B in 2016. For consumers, the Super Premium upgrade movement consisted of 3 stages:

  1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.
  2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.
  3. Value Shop – After commitment, the “driver” is to find a cheaper price! – The Internet, Mass Market, Private label

This brought us to 2017. Time for a new “must have” trend. That didn’t happen but the competitive pricing situation brought about another change. Recent food trends have been driven by the higher income and higher education demographics. However, the “value” of Super Premium was established and now more “available”. Blue Collar workers led a new wave of spending, +$4.6B, as Super Premium more deeply penetrated the market. After the big lift in 2017, 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts immediately rolled back their upgrade and spending fell -$2.51B. This 2018 decrease broke a 20 year spending pattern. In the 1st half of 2019, Pet Food spending remained stable at the new lower level. In the second half of 2019 we started to see a recovery from the overreaction to the FDA warning and spending increased by $2.3B. Then came 2020. The recovery was continuing but a new outside influence was added which had a massive impact on U.S. consumers – the COVID-19 pandemic. In March nonessential businesses were closed. This also produced a wave of panic buying in some truly essential product categories. In the Pet Industry there is only 1 truly essential category – Pet Food. Coupled with the FDA “recovery” and the ongoing movement to Super Premium, this produced an incredible $6.76B lift in Pet Food Spending in the 1st half of 2020. Spending fell in the 2nd half of 2020 and plummeted in the 1st half of 2021. Pet Parents didn’t binge again, and some began using up the stockpile that they panic bought in the early days of COVID. In the 2nd half of 2021, the up/down impact of COVID was essentially over. Pet Parents were still committed to their children’s health which included Super Premium Foods and Medical Supplements, often in treat form. The internet also made this quality choice accessible to more households so Pet Food spending increased both in the 2nd half of 21 and the 1st half of 22. 59% of the lift occurred in the 2nd half of 2021 when inflation was still low. Was that a factor?

Let’s look at Pet Food spending by the 2 most popular demographic measures – income & age group. They both show the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending and its influence continues to grow.

Here’s how you get the change for each half of the 21>22 mid-yr numbers using the over $100K group as an example:

$100K> Mid-yr Total Spending Change: $16.36B – $13.77B = Up $2.59B (green outline = increase; red outline = decrease)

    • 2nd half of 2021: Subtract Mid-21 ($13.77) from Total 2021 ($15.51B) = Spending was up $1.74B in 2nd half of 2021.
    • 1st half of 2022: Subtract Total 2021 ($15.51B) from Mid-22 ($16.36B) = Spending was up $0.85B in 1st half of 2022.
  • All increased spending for the year but there were 3 different patterns in the individual groups. #1. $150K> & $50>69K spent more in both halves. #2. <$30K & $70>99K spent less in the 1st half of 2022. #3. $30>49K & $100>149K spent less in the 2nd half of 2021. All but #2 have a high/low income mix. #2 has the lowest income and the middle income groups. Both are very price sensitive. Note: Their spending dropped during the highest inflation.
  • Perhaps the most obvious fact is the continued spending disparity due to income. Back in 2014, prior to the big lift due to Super Premium, $70K was the “halfway point” in Pet Food spending. The under $70K group accounted for 66.7% of CUs and 51.1% of Pet Food spending. They lost the lead in 2015 as $70K> spent 50.8% of Pet Food $. In 2020, the binge buying of Pet Food by $100>150K pushed the $100K> group to the top at 55.1%. Then the big drop in 2021 flipped $70K> back into the lead at 60.8%. They currently have a share of 62.0%. The halfway point in Pet Food spending is below $100K but still high at $91K, the 2nd highest in history.
  • < $70K > The Pet Food spending patterns for both big groups are similar with increases in both halves. However, in a bit of a surprise, the Fall 2021 lift is larger for $70K> while the early 2022 lift is larger for <$70K. Higher Inflation appears to not have grossly affected these big groups.
  • < $100K > The spending patterns of these 2 groups closely mirrors the Under/Over $70K pattern. The Fall 2021 spending lift for the $100K> group was 100% driven by $150> CUs. The Spring 2022 lift for <$100K was totally driven by CUs with an income of $30>69K. Again, not the result that you would expect based upon higher inflation.
  • <$30K – With a lift in the Fall and a drop in the Spring, spending for this lowest income group essentially remained stable vs last year. They may have been impacted by rising prices in 2022.
  • $30>49K – This low-income group also includes many Retirees. They are growing in number and are committed to their pets. However, their spending behavior timing often lags behind other groups which may explain the Spring lift.
  • $50>69K – This low income group was hit hard by the pandemic. With steady growth in both halves, they have finally surpassed their Pet Food spending in pre-pandemic 2019.
  • $70>99K –This middle-income group was the most negatively affected by the pandemic. However, they fully recovered in 2021. Then spending flattened in early 2022. They are very value conscious. We’ll see if the skyrocketing inflation in the 2nd half of 2022 affects their Pet Food spending.
  • $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. This group led the way in Pet Food binge buying and the subsequent drop. Sales grew slightly in early 2022 so they remain above 2019 $.
  • $150K > Their Pet Food spending also fell in 2020, likely due to value shopping on the internet. They came back strong in 2021, 10% above 2019. $ are up slightly in 2022. Strong inflation and the resulting higher prices will likely cause them to spend more.

Now let’s look at Pet Food spending by Age Group.

  • 25>34 yr olds had a steady decline. All other groups spent more but 75> had a spending dip in early 2022.
  • <25 – Their spending had a huge increase and they are back above $1B. It’s likely that more moved out of their parents’ home and many added pets to their household.
  • 25>34 – A -$1.35B drop after last year’s $1.77B increase. This group, especially those with families, are under a lot of financial pressure. Overall inflation likely caused many CUs to cut back on spending and even rescind Food upgrades.
  • 35 > 44 – Spending fell in 2020 likely because they turned to the internet. They are 2nd in income and their spending has smaller fluctuations. Their biggest lift occurred in the 1st half of 2022 and they exceeded $6B for the 1st time.
  • 45 > 54 and – They have the highest income, so their annual up/down spending pattern is not expected. Their Pet Food $ dropped throughout 2020 but it has increased in every half since then. However, it is still below the $7.09B peak in 2019. Value Shopping & downgrades/upgrades are all likely to be factors in a complicated pattern.
  • 55>64 – This group is still mostly Boomers, the most emotional Pet Parents. In 2020 they led the way in Pet Food binge buying. They also had the biggest 2021 drop. With growth in both halves, including a $0.77B lift in 2022 they have now returned to their pre-pandemic 2019 spending level.
  • 65 > 74 – This group is all Boomers but with lower income. Spending grew in both halves. They are committed to their pets. Even though the members change, they are the only age group with steady annual growth since 2016.
  • 75> – COVID had little impact on spending. In 2021 they upgraded, +$1.76B. Spending fell slightly in the 1st half of 22.

That gives us the “big picture” for our 2022 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2022. We’ll compare it to the 1st half of 2021 and document the biggest changes since then.

  • The biggest increases are much larger than the biggest decreases in 10 categories. They are almost equal in Age, but the drop is larger in CU Composition. In Housing and CU Size, all segments spent more in 2022 than in 2021.
  • There are a number of usual winners, Managers, White, Not Hisp., Boomers, 55>64, Big Suburbs, Homeowners w/Mtges and 3+ Earners. There are also some surprises like $30>49K, 2+ Unmarried Adults and HS Grads.
  • When we look at the losers, we also see some familiar names, <$30K, Born <1946, 1 Earner Single and Center City. However, there are 2 big surprises – Adv. College Deg. and 25>34 yr olds.
  • Pet Food spending in the 1st half of 2022 was $1.94B ahead of the 1st half of 2021 but $3.44B ahead of 2019. In fact, 68 of 82 demographic segments (83%) spent more in 2022 than in 2021. The pandemic turmoil appears to be over.

The spending lift was relatively large in the 1st half, but not unexpected, after the huge drop in Pet Food $ in the 1st half of 2021 following the buying binge in 2020. It appears that the steep pandemic roller coaster may have ended in 2021 and we might be back on a more normal path of consistent growth. Pet Food spending in mid-yr 2022 was $36.35B. This is $1.57B below the binge peak of $37.96B in mid-2020 but $7.49B more than the $28.90 in pre-pandemic mid-yr 2019. If we ignore the pandemic turmoil, then Pet Food spending has grown 25.9% in 3 years. That’s an annual growth rate of +7.9%, which is 41% higher than the +5.6% rate from 1984 to 2019. That’s real proof that the Pet Food segment is back and doing even better than usual. Unfortunately, we may be facing a new challenge – runaway inflation. It started slowly at the end of 2021, then continued to grow in 2022, hitting 10+% in June and has stayed in double digits. Past periods of Pet Food inflation just caused Pet Parents to spend more. Pets must have food. However, this price increase is at record levels. We should note that the pandemic is also a factor in inflation because supply chain issues related to COVID had a big impact on prices. Overall inflation has lessened but there has been little improvement in Pet Food. All pet spending has been moving towards higher incomes. Households with a lot of financial pressure could cut back on more discretionary pet spending, reduce purchase frequency, and even downgrade their pet food. We have seen little evidence of a negative impact on Pet Food in early 2022. We’ll see what happens in the 2nd half of 2022 when inflation took off. We’ll get that data in September.

Retail Channel Monthly $ Update – April Final & May Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for April and then go to the Advance Report for May. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the April Final. All were down from last month, and driven by drops in Gas Stations and Auto, Total Retail was down vs April 2022. When you consider inflation, the negatives become widespread. Gas Stations are still really down vs 2019. The biggest concern is that Relevant Retail was down in all “real” measurements vs 21 & 22. (All $ are Actual, Not Seasonally Adjusted)

The April Final is $3.0B less than the Advance Report. Specifically, Restaurants: -$0.4B; Auto:-$0. 1B; Gas Stations: N/C; Relevant Retail: -$2.5B. Sales were down from March and driven by drops in Auto & Gas Stations, consumers spent slightly less vs last year. However, Total Retail, Restaurants & Relevant Retail were positive in all other actual Sales numbers vs 22, 21 & 19. Auto was “really” down vs 21 and Gas Stations are really down Ytd vs 21 & 19. The most significant data may be that real sales for Relevant Retail vs 2022 have now been down for 12 of the last 13 months. In April all real numbers vs 22 & 21 are negative. They are #1 in performance since 2019 but only 49% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in April in the Stacked Bar Graph Format

Overall– 6 of 11 were down from Mar, but vs 22, 7 were up vs Apr and 10 Ytd. 8 were “really” down monthly & 6 Ytd. Vs 2021, 9 had increases but only 2 monthly were real and 4 Ytd. Vs 2019, Office/Gift/Souvenir was the only real negative.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.4% since 2019. Prices for the Bldg/Matl group have inflated 23.1% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month vs 22 & 21 & Ytd vs 22 while Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 21.5% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.4%, Real: 1.4%; Farm: 10.7%, Real: 4.5%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is still 78% higher than for Drugs/Med products. Drug Stores are positive in all but real $ vs April 21 and 74% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 10% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.7%; Drug Stores: +4.9%, Real: +3.7%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down from March and are now negative vs 22 & 21 except for actual and real YTD $ vs 22. Prices are currently deflating -0.04%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 59% of their 44.6% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.7%; Real: +6.1%.
  • Gen Mdse Stores – All but Disc Dept Strs were up vs March. In actual sales, they also had the only negative – vs April 22. In real sales, the only positives were in monthly & Ytd sales for $/Value Stores vs 2022. Disc Dept Stores are by far the worst performer with only 12% real growth since 2019. The other channels average 35%. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.5%, Real: +2.5%; Disc. Dept.: +3.1%, Real: +0.4%
  • Office, Gift & Souvenir Stores – Actual sales are down from March but up in all measurements vs 2022, 2021 & 2019. However, their real sales growth is still down monthly vs 2022 & 2021 and Ytd vs 2019. Their recovery didn’t start until the spring of 2021, but they are making progress. Avg Growth Rate: +1.3%, Real: -1.3%
  • Internet/Mail Order – Sales are up +6.2% from March but below $100B at $97.B – still another monthly record. All measurements are positive, but their growth is only 33% of their average since 2019. However, 80% of their 99% growth since 2019 is real. Avg Growth: +18.7%, Real: +15.6%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in Mar>Apr. Real sales are down vs April & Ytd 2022, but all other measurements are positive. They are still the % increase leaders vs 2021 and 72% of their 58.3% growth since 2019 is real. Average 19>23 Growth: +12.2%, Real: +9.2%. They remain 2nd in growth since 2019 to the internet. Pet Stores are certainly contributing.

Even as it slows, inflation remains an important factor in Retail. In actual $, 7 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 3 vs 2022 & 2 vs 2021. Inflation is slowing but not as fast as sales increases. Inflation has increased its impact at the retail channel level. Recent data indicates that Inflation continues to slow. Let’s look at the impact on the Advance Retail $ales for May.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March, fell in April, then grew again in May. Except for a drop by Gas Stations, all actual sales are positive. The biggest change is that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are positive. Last month there were only 6. This clearly shows that the slowing inflation rate is starting to have an impact.

Overall – Inflation Reality – The May $ increase rate was low but below the inflation rate for all but Restaurants. At 8.2%, their inflation remains high, but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail are positive again. That’s 2 of the last 4 months. However, they have been down in 12 of the last 14 months so their Ytd Real sales are still down vs 2022 & 2021. They have a ways to go to catch up.

Total Retail – Since June 2020, every month but April 2023 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in Mar, fell in Apr, then grew in May. Inflation is slowing but sales growth remains low. Sales are up 2.8% vs last year. That’s only 35% of their average growth since 2019. Also, real sales are down monthly and Ytd vs 21 and only 35% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but this clearly shows its cumulative impact. Avg 2019>23 Growth: +7.9%, Real: +3.0%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 8.2% in May from 8.4% last month but is still +16.1% vs 21 and +20.9% vs 19. 40.2% of their 40.8% growth since 19 is real but they fell to 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.9%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, then grew in May. Now, only monthly & Ytd real sales vs 21 are negative. Prices are +0.1% vs May 22 but are still deflated Ytd. Avg 2019>23 Growth: +6.7%, Real: +0.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>May, -10.9% Ytd vs 22. However, prices are still +19.4% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Look at the rates. Real sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.5%, Real: -1.2%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020 and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops. Sales in March turned up, fell in April, then rose in May. All actual sales are up vs 22, 21 & 19 and only Ytd real sales are down vs 22 & 21. Monthly Real sales vs last year have been positive in 2 of the last 4 months but negative  in 12 of the last 14 months. 48% of their 19>23 $ are real – #1 in performance. Their Avg 2019>23 Growth is: +8.4%, Real: +4.3%. This huge group is where America shops. The fact that real sales have been up in 2 of the last 4 months gives us hope.

Inflation is slowing but the impact is still there. Sales increases are slow, but the fact that 55% of all real sales numbers vs 22 & 21 are now positive is a good sign. Restaurants are still doing well and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Only Ytd real sales vs 22 & 21 are negative. This shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive in 2 of the last 4 months. This is not the end of the crisis, but it could be the beginning of a turnaround.

Here’s a more detailed look at May by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.4%, Real: +4.3%. All channels were up from April but only 6 were up vs 22 & 8 vs 21. Only 5 had a “real” increase vs 22 and 4 vs 21. The negative impact of inflation is visible in both actual & real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are up from April but down for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.4%, Real: -2.3%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up from April and in all other measurements. However, their real sales are down in all measurements but Ytd vs 19. Only 34% of their 27.3% 19>23 lift is real – the impact of inflation. Avg Growth: +6.2%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are up from April and in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 9.0% of the growth since 2019 is real. Avg Growth: +6.3%, Real: +0.6%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are up from April and in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 74% of their 22.2% growth from 2019 is real. Avg 2019>23 Growth: +5.1%, Real: +3.9%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Actual Sales are up from April and only down vs May 22. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 63% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.7%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are up from April but down in all other measurements but Ytd vs 2019. Their real sales are now all down, even vs 2019. Avg 2019>23 Growth: +4.1%, Real: -0.1%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up vs April but down in all measurements but Ytd vs 19. However, deflation has caused real sales to be up in all measurements. Consumers bought more but paid less. Avg 2019>23 Growth: +0.4%, Real: +2.2%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation slowed and Sales are up for the 3rd consecutive month. The only negative is Ytd vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +8.0%, Real: +1.9%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are up from April and positive in all other measurements. Real sales are only down monthly and Ytd vs 21. Their inflation is lower than most groups so 64.5% of their 30.7% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up 12.5% from April and positive in all measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 67% of their 43.9% 19>23 growth and even 53% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.5%, Real: 6.6%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are up from April and all measurements are positive. 78% of their 87.6% growth since 2019 is real. Their Avg Growth: +17.0%, Real: +13.9%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>May which should improve the Retail Situation. Sales were up from April for all big groups and all 11 smaller channels. While Inflation continues to slow in most channels, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real sales for Relevant Retail are now positive vs May 2022 but are still negative for 5 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore, Health Care and smaller channels like Sporting Goods & Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – May Update: Prices are still high, +10.3% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. May prices grew 0.3% from April and the CPI was still up +4.0% vs 2022, but down from +4.9% last month. The grocery pricing surge has also slowed. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +5.8%, with 3 consecutive months below 10%. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July 2022 and is now +10.3% in May, more than 2½ times the national rate of 4.0%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from May 2021 to May 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In May, Pet Products prices are up from April, but they fell in both Service segments.

In May 2021, the national CPI was +4.8% and Pet prices were +2.2%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>May, Food prices grew every month. Prices in the other segments also grew except for 1 monthly dip for each. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since Nov.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>May but 38% of the overall 18.3% increase in the 41 months since December 2019 happened in the 6 months from January>June 2022.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 2020 > Sept 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued. 93% of the 23.3% increase has occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, setting a new record. In March, they fell but they set a new record in May.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April and prices fell -0.3% in May. Services still have the 3rd highest Petflation rate.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July. In 2023 prices grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December but has turned up again Jan>May. Except for 3 individual monthly dips, prices in all segments have consistently increased in 2023. It has been ahead of the cumulative U.S. CPI on our 2019>23 chart since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for May and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation slowed slightly to 10.3% in May but is now 2½  times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.3% vs April and were up 4.0% vs May 2022. The Grocery increase is down again, to +5.8% from +7.1%, but is still a big negative. Inflation often slows in May so it’s not surprising that 3 of 9 categories had decreased prices from last month, compared to 1 in April. Of the 6 categories with increases, only 2 were over 0.3%, both from the Pet Industry – Supplies: 0.9%; Pet Food: 0.8%. The overall national YOY monthly inflation rate for May is down from April and is again much lower than the 21>22 rate. All but 3 categories – Pet Food, Veterinary and Total Pet have a similar pattern. In these 3 the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019. In our 2021>2023 measurement you also can see that over 70% of the cumulative inflation since 2019 occurred in the current surge for all categories but Veterinary Services, Pet Services, Medical Services and Haircuts/Personal Services. Of Note: These are all service expenditures, not products. The Pet Supplies Segment has a unique situation. The 21>23 inflation surge provided 116% of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 20>21.

  • U.S. CPI– Prices are +0.3% from April. The YOY increase is down to +4.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 2 times higher than the target. However, a 11th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is still 13.0%, 69% of total inflation since 2019. How many households “broke even” by increasing their income by 13% in 2 years?
  • Pet Food– Prices are +0.8% vs April and 13.8% vs May 2022. They are also more than double the Food at Home inflation rate – not good news! The YOY increase of 13.8% is being measured against a time when prices were 8.4% above the 2019 level, but that increase is still an incredible 4.9 times the pre-pandemic 2.8% increase from 2018 to 2019. The 2021>2023 inflation surge generated 99% of the total 24.3% inflation since 2019.
  • Food at Home – Prices are up +0.1% from April. The monthly YOY increase is 5.8%, down from 7.1% in April and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 24.9% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 74% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies– Prices increased +0.9% from April, but they still have the lowest increase since 2019. However, they did move up to 3rd place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. but prices fell in March. They bounced back in Apr>May and set a new record.
  • Veterinary Services – Prices are -0.2% from April. They are +11.0% from 2022 and remain in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 29.8% compared to Food at home at 24.9%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In May prices fell -0.1% from April and are -0.1% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 33% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. May 23 prices were down -0.3% from April and +5.6% vs 2022, which is down from 6.4% last month and 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 62% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.2% from Apr. and +4.9% from 2022, only the 3rd highest rate since 2019. Inflation had a significant surge in 20>21 so just 54% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is 27% higher than the 21>22 rate, 2.5 times the National CPI and +10.3% is the highest May rate in history. Vs April, Product Prices increased while Services fell so Total Pet was only up 0.3%. Note: An Apr>May increase has happened in 21 of the last 26 years. Food & Veterinary are the leaders and are the only segments in which the 22>23 inflation rate exceeds the 21>22 rate. Pet Food has generally been immune to inflation as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other segments.

Now, let’s look at the YTD numbers.

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is essentially tied with 21>22. The Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.1%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 35% from 21>22 but is still 20% more than the average increase from 2019>2023, and over 2½ times the average annual increase from 2018>2021. 74% of the 18.8% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 93.3% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 60%. You can see the impact of supply chain issues on the Grocery category as 77% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is up slightly at 5.5% and prices hit a new record high in May. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 113% of this increase happened from 2021>23. Prices are up 12.8% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they are only the 4th highest since 2021. At +6.3%, they have the highest average annual inflation rate since 2019 but Veterinary is unique. They are the only category in which the inflation rate grew steadily every year from 2019>2023. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have deflated monthly to reach a rate actually 48% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr. The January increase of 8.4% was the largest in history. YTD May has slipped a little to 7.2%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 9% below the 2020>21 peak but is 76% more than 2018>19. Consumers are paying 20% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices have continued to climb. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar then rose again in Apr>May. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.3%, 94.3% more than the National rate. In May 22 it was 5.8% less than the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 10.4% in April to 10.3% in May. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 9 of the last 10 months have been over 10%. We are back in double digits. The current rate is 6.4 times more than the 1.6% average rate from 2010>2021. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. This recognized spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 10.3% from 2022 but they are up 19.3% from 2021 and 23.6% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need a repeat.

Retail Channel $ Update – March Final & April Advance

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While inflation continues to slow, its cumulative effect on consumer spending is now being felt. The rate of sales increases has slowed even more than inflation. This has caused a drop in the amount of product sold in many channels. Some have even turned negative in the actual $ sold vs previous years. A recession is the biggest fear, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for March and then go to the Advance Report for April. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the March Final. All were up from last month and only Gas Stations and Auto had any decreases vs 21 or 22. When you consider inflation, Auto was down vs 21 and Gas Stations vs 19 & 21. Total Retail & Relevant retail were really down vs Apr 21 but Relevant Retail was also down for the month & Ytd vs 2022. (All $ are Actual, Not Seasonally Adjusted)

The March Final is $6.0B less than the Advance Report. Specifically, Restaurants: -$4.6B; Gas Stations: -$0.7B; Auto: +0.9B; Relevant Retail: -$1.6B. Sales were up from February as expected and consumers continue to spend more vs last year in all but Gas Stations. In fact, Total Retail, Restaurants & Relevant Retail were positive in all actual Sales measurements vs 22, 21 & 19. Auto was “really” down vs 21 and Gas Stations are really down Ytd vs 21 & 19. The most significant change is that the real sales for Relevant Retail vs 2022 turned negative again. It has now been down for 11 of the last 12 months. They are still in 1st place in performance since 2019 but only 50% of their growth is real.

Now, let’s see how some Key Pet Relevant channels did in March in the Stacked Bar Graph Format

Overall– All 11 were up from Feb, but vs 22, 10 were up vs Mar and Ytd. 8 were “really” down monthly & 6 Ytd. Vs 2021, 7 had increases but only 3 monthly were real and 4 Ytd. Vs 2019, Office/Gift/Souvenir was the only real negative.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 38.7% since 2019. Prices for the Bldg/Matl group have inflated 23.4% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month vs 22 & 21 & Ytd vs 22. Farm Stores are a little better, only down vs March 2021. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 22.1% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 8.2%, Real: 2.2%; Farm: 10.6%, Real: 4.5%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is over 2 times higher than for Drugs/Med products. Drug Stores are positive in all numbers vs 22, 21 & 19 and 75% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 10% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.7%; Drug Stores: +5.1%, Real: +3.8%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up 30% from February, slightly positive vs 2022 but down vs 2021. Real sales are only positive Ytd vs 2022. Their current inflation rate is 1.1%, a big drop from +5.4% in 21>22 and +6.5% in 20>21. The result is that 59% of their 45.4% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.8%; Real: +6.1%.
  • Gen Mdse Stores – All channels are up vs February. In actual sales, the only negative was Disc Dept Stores Ytd vs 2021. In real sales, the only positives were in monthly & Ytd sales for $/Value Stores vs 2022. Disc Dept Stores have the worst performance of any channel in all measurements and only 17% real growth since 2019. The other channels average 36%. Avg 19>23 Growth: SupCtr/Club: 6.1%, Real: 2.2%; $/Value Strs: +6.4%, Real: +2.4%; Disc. Dept.: +3.3%, Real: +0.6%
  • Office, Gift & Souvenir Stores – Actual sales are up from February and in all measurements vs 2022, 2021 & 2019. However, their real sales growth is still down monthly vs 2022 & 2021 and Ytd vs 2019. Their recovery didn’t start until the spring of 2021, but they are making progress. Avg Growth Rate: +1.2%, Real: -1.5%
  • Internet/Mail Order – Sales are up +13.0% from February and above $100B, a monthly record. They are positive for all measurements, but their growth rate is only 43% of their average since 2019. However, 80% of their 101.3% growth since 2019 is real. Avg Growth Rate: +19.1%, Real: +16.0%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in March. Real sales are down vs March & Ytd 2022, but all other measurements are positive. They are still the % increase leaders vs 2021 and 73% of their 59.5% growth since 2019 is real. Average 19>23 Growth: +12.4%, Real: +9.4%. They remain 2nd in growth since 2019 to the internet. I’m sure that Pet Stores are contributing.

There is no doubt that high inflation is an important factor in Retail. In actual $, 10 channels reported increases in sales vs 2022 and 7 vs 2021. When you factor in inflation, the number with any “real” growth drops to 3 vs 2022 & 2021. Inflation is slowing but not as fast as sales increases. Inflation has increased its impact at the retail channel level. Recent data indicates that Inflation again slowed a little. Let’s look at the impact on the Advance Retail $ales for April.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March then fell in April. Except for dips by Auto & Gas Stations, all actual sales are slightly positive. The biggest change is that of the groups’ total of 20 “real” sales measurements vs 22 & 21, only 6 are positive. 3 of those are from Restaurants but even their sales vs April 2022 are really down. This clearly shows the growing impact of cumulative inflation.

Overall – Inflation Reality – The April $ increase rate for all vs 2022 was below the inflation rate, producing negative real numbers. You also see the impact of cumulative inflation as real sales are down for all but Restaurants vs 2021. Restaurants still have the strongest performance vs 2022, 2021 & 2019. The biggest negative is in Relative Retail. Monthly & Ytd Real sales are down vs 2022 & 2021. Consumers pay more but buy less.

Total Retail – Every month since June 2020 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in March then fell in April. Inflation is slowing but so is sales growth. Sales are up 0.2% vs last year. That’s the lowest rate since the -6.7% drop in May 2020. Also, real sales are down vs April 22 as well as monthly and Ytd vs 21. Plus, only 36% of the 19>23 growth is real. Inflation is slowing but it has been above 4% since March 2021. We are starting to see the cumulative impact. Avg 2019>23 Growth: +8.1%, Real: +3.2%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22, 21 & 19. Inflation decreased to 8.4% in April from 8.6% last month but is still +16.1% vs 21 and +20.6% vs 19. 42.0% of their 41.9% growth since 19 is real but that is less than the 53.3% of their 40.7% growth since 21. Recovery started late but inflation started early. Avg 2019>23 Growth: +9.1%, Real: +4.1%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better but got worse in March & April. April $ are down vs 22 & 21 and Ytd Real sales vs 2021 are also down. Their Ytd real sales vs 19 are still positive but slowing, despite continued deflation. Avg 2019>23 Growth: +6.9%, Real: +1.0%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then dropped 17% in Mar and 12.4% in April. However, prices are still +31.0% vs 21. The deflation actually caused monthly & Ytd sales vs 22 to drop but Ytd real sales are up. However, all real sales vs 21 & 19 are still down. Avg 2019>23 Growth: +6.9%, Real: -1.3%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020 and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops. Sales in March turned up then fell in April. All actual sales are up vs 22, 21 & 19 but all real sales vs 22 & 21 are down. Real sales vs last year have now been negative in 12 of the last 13 months. 49% of their 19>23 $ are real, which shows that Inflation is a problem that began in 2022. Their Avg 2019>23 Growth is: +8.5%, Real: +4.4%. The performance of this huge group is critically important. This is where America shops. The fact that real sales are down again is bad news.

Inflation is slowing slightly but the impact is growing. Sales increases are slowing, and the fact that 70% of all real sales measurements vs 22 & 21 are negative is very concerning. Restaurants are still doing well while Auto & Gas Stations are still struggling despite ongoing deflation. However, the biggest concern is Relevant Retail. They have definitely returned to Inflation Phase II – Consumers spend more but the amount bought decreases. The Apr sales increase rate is the lowest since the pandemic drop in April 20. This can lead to Phase III, when actual sales drop. Let’s hope for a turnaround.

Here’s a more detailed look at April by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.5%, Real: +4.4%. Only 3 channels were up from March but 5 were up vs 22 & 7 vs 21. Only 3 had a “real” increase vs 22 and 5 vs 21. The negative impact of inflation is visible in both actual & real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are down from March but up for all comparisons but vs April 22. However, their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +1.0%, Real: -1.7%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up from March and in all other measurements. Their real sales are also up slightly in all measurements but Ytd vs 21. Only 36% of their 28.5% 19>23 lift is real – the impact of inflation. Avg Growth: +6.5%, Real: +2.5%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from March but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 9.6% of the growth since 2019 is real. Avg Growth: +6.4%, Real: +0.7%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from March but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been low so 75% of their 22.1% growth from 2019 is real. Avg 2019>23 Growth: +5.1%, Real: +3.9%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Actual Sales are down from March and vs April 22. Real sales are down vs April 22 & 21 and Ytd vs 22. However, 62% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.7%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Sales are down from March and in all measurements but Ytd vs 21 & 19. Their real sales are all down vs 22 & 21 and only 8% of their 19>23 growth is real. Avg 2019>23 Growth: +4.7%, Real: +0.4%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are down vs March and in all measurements but Ytd vs 21 & 19. However, real sales are up for all but vs April 22. This happened because of strong deflation, -6.4>-7.6%. Avg 2019>23 Growth: +0.6%, Real: +2.4%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Sales are up 4% vs last month – 2 consecutive increases. The only other positives are Ytd vs 21 & 19. They have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their % sales growth since 2019 is real. Avg 2019>23 Growth is: +7.9%, Real: +1.9%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. $ales are down from March and in all other measurements but Ytd vs 22 & 19. Real sales are all down except vs 19. Just 3 months ago all measurements were positive. Their inflation is lower than most groups so 62% of their growth since 2019 is real. Avg 2019>23 Growth: +6.5%, Real: +4.1%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up from March and for all but real April 23 vs 22. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 68% of their 42.8% 19>23 growth and even 50% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.9%, Real: 7.0%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from March but all measurements are positive. 78% of their 89.2% growth since 2019 is real. Their Avg Growth: +17.3%, Real: +14.1%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Apr which should improve the Retail Situation. Sales were down from March for all big groups and 8 of 11 smaller channels. While Inflation continues to slow in most channels, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is now below the lower inflation rate. This is evident in Relevant Retail as Real sales are now negative for all but Ytd vs 2019. However, actual & real sales vs 22 are now negative for most channels. Only 3 – NonStore, Clubs/$ Strs & Health Care are both actually and really positive vs 22. We seem to have returned to Inflation, Phase II, increased $ales but a decrease in the amount sold. However, some channels may be moving to Phase III, when actual $ales also decrease.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – April Update: Prices increase to +10.4% vs 2022

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Inflation continues to be big news. The YOY increases in the monthly Consumer Price Index (CPI) are larger than we have seen in decades but are definitely slowing. April prices grew 0.5% from March and the CPI was still up +4.9% vs 2022, but down slightly from +5.0% last month. The grocery pricing surge has also slowed. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +7.1%, with 2 consecutive months below 10%. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July and is now +10.4% in April, more than double the national rate of 4.9%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from April 2021 to April 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In April prices are up from March for all segments and all but Supplies are at their cumulative inflation peak.

In March 2021, the national CPI was only +3.9% and Pet prices were +1.9%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated, except for a small October dip in Veterinary. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>Apr, prices in all but Supplies grew every month. Cumulative Total Petflation from Dec 2019 has been above the U.S. CPI since November.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Apr but 38% of the overall 18.1% increase in the 40 months since December 2019 happened in the 6 months from January>June 2022.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 2020 > Sept 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued. 93% of the 22.3% increase occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, setting a new record. In March, they fell -0.3%. but are up +0.3% in April.
  • Pet Services – Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Services remains in 3rd place among Pet Industry Segments.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July and set new records in January>April.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December but has turned up again Jan>Apr. Except for a dip by Supplies in March, prices in all segments increased every month in 2023. It has been ahead of the cumulative U.S. CPI on our 2019>23 chart since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for April and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation increased to 10.4% in April and is now more than double the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.5% vs March and were up 4.9% vs April 2022. The Grocery increase is down again, to +7.1% from +8.4%, but is still a big negative. Inflation usually continues in April so it’s not surprising that 8 of 9 categories had increased prices from last month, compared to 6 in March. 3 of the 8 increases were 1.0+%, all from the Pet Industry – Total Pet: 1.8%; Pet Food: 1.4%; Veterinary: 3.2%. The overall national YOY monthly inflation rate for April is down from March and is again much lower than the 21>22 rate. 3 categories – Pet Supplies, Medical Services and Food at home have a similar pattern. In all other categories the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019 for all but Haircuts/Services. In our 2021>2023 measurement you also can see that over 70% of the cumulative inflation since 2019 occurred in the current surge for all categories but Veterinary Services, Pet Services, Medical Services and Haircuts/Personal Services. Of Note: These are all service expenditures, not products. The Pet Supplies Segment has a unique situation. The 21>23 inflation surge provided 110% of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 20>21.

  • U.S. CPI– Prices are +0.5% from March. The YOY increase is down to +4.9%. It peaked at +9.1% back in June. The targeted inflation rate is <2% so we are still over 2 times higher than the target. However, a 10th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is 13.6%, 73% of total inflation since 2019. How many households “broke even” by increasing their income by 14% in 2 years?
  • Pet Food– Prices are +1.4% vs March and 14.6% vs April 2022. They are also more than double the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were 6.9% above the 2019 level, but that increase is still an incredible 6.6 times the pre-pandemic 2.2% increase from 2018 to 2019. The 2021>2023 inflation surge generated 95% of the total 24.0% inflation since 2019.
  • Food at Home – Prices are up +0.1% from March. The monthly YOY increase is 7.1%, down from 8.4% in March and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.0% Inflation for this category since 2019 is 34% more than the national CPI and remains 2nd to Veterinary. 75% of the inflation since 2019 occurred from 2021>2023. The pattern now mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies – After a dip in March, prices increased +0.3% in April. They still have the lowest increase since 2019 and remain in last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. but prices fell in March. They bounced back in April but not quite enough for a new record.
  • Veterinary Services – Prices are +3.2% from March. They are +10.2% from 2022 and are again in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 30.6% compared to Food at home at 25.0%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 68% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In April prices fell -0.2% from March and were only +0.4% vs 2022, the lowest rate from 2019>23. Medical Services are not a big part of the current surge as only 33% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. April 23 prices were only up +0.1% from March and +6.4% vs 2022, which is down from +8.0% last month. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 58% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.3% from Mar. and +5.3% from 2022, the 2nd highest rate since 2019. Inflation had its biggest increase in 20>21 so just 50% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is 28% higher than the 21>22 rate, 2.1 times the National CPI and +10.4% is the highest April rate in history. Prices increased in all segments vs March so Total Pet was up 1.8%. This was expected as a Mar>Apr increase in Petflation has happened in 24 of the last 26 years. Food is the runaway leader, but the 22>23 inflation rate for all but Supplies exceeds the 21>22 rate. Pet Food has generally been immune to inflation as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other Segments.

Now, let’s look at the YTD numbers.

The increase from 2022 to 2023 is the biggest for 5 of 9 categories. The 22>23 rate for Food at Home is essentially tied with 21>22. The Total CPI, Pet Supplies & Medical Services are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.2%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 30% from 21>22 but is still 27% more than the average increase from 2019>2023, and almost 3 times the average annual increase from 2018>2021. 75% of the 18.8% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 91.9% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 64%. You can see the impact of supply chain issues on the Grocery category as 78% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – While the inflation rate is down slightly at about 5.4%, prices are again near February’s record high. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 113% of this increase happened from 2021>23. Prices are up 12.8% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they are only the 4th highest since 2021. At +6.2%, they have the highest average annual inflation rate since 2019 but Veterinary is unique. They are the only category in which the inflation rate grew steadily every year from 2019>2023. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have deflated monthly to reach a rate actually 33.3% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr. The January increase of 8.4% was the largest in history. YTD April has slipped a little to 7.6%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 10% below the 2020>21 peak but is 68% more than 2018>19. Consumers are paying 20% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices have continued to climb. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar then rose again in Apr. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.3%, 83.9% more than the National rate. In April 22 it was 20.8% less than the CPI.

Petflation is getting stronger. Let’s put the numbers into perspective. Petflation grew from 9.4% in March to 10.4% in April. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 8 of the last 9 months have been over 10%. We are back in double digits. The current rate is 6.5 times more than the 1.6% average rate from 2010>2021. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. This recognized spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 10.4% from 2022 but they are up 19.3% from 2021 and 23.8% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. Let’s hope for a repeat.

Inflation: A Historic Look – 1992 > 2022

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There is no doubt that the current inflation wave is big news with rates higher than we have seen in decades. Through a series of graphs, we hope to put the current situation into a better perspective. We will track the change in CPI of a few key, major expenditure groups over the last 30 years – from 1992 to 2022, then show the evolving impact on Total Retail and a major Pet Relevant channel. In our 1st chart we will compare the CPI change of the 2 biggest groups – Commodities and Services so that we can better appreciate their influence on the National CPI.

We will show the specifics for certain years including: every 10 years, the great recession, and the pandemic. There are also some data highlights: light blue = deflation, red = the highest annual inflation rate; pink = 2nd highest rate; yellow = 3rd highest rate.

In what may be a surprise to many of you, the Services segment leads the way in Inflation. They also have the biggest share of the CPI index, 60%, + or minus 4%, every year from 1992 to 2022. We should note that mortgage payments/rent (a service expenditure) accounts for 1/3 of the total CPI number. This is major part of the budget for most households, but changes occur less frequently since the price is generally determined by mortgages or leases.

  • Services – There were no deflationary years for Services. Prices just kept increasing. They had doubled by 2017 (25 yrs) and had increased by 139% in 2022, which produced an annual average inflation rate of +2.9%. The 3 biggest increases occurred in: 2022 = +6.2% (No surprise); 2001 = +4.1%; 2006 = 3.8%. Inflation did slow a little during the great recession 2009>11 and actually fell below 1% to +0.8% in 2010. We have a similar pattern for Services in the Pet Industry. The CPI for Veterinary and Non-Vet Services has been tracked since 1997. Prices for both segments have increased every year but at a higher rate than for National Services. Non-Vet Services = +3.3%; Veterinary = +4.7%.
  • Commodities – These are products. They have a wide range – from Food at Restaurants to gasoline to groceries. You can see that the pricing is much more volatile for this group. They have increased by 71% since 1992 for an annual average increase of +1.8%, 38% below Services. Prices have also deflated in 5 years, with the biggest drop -3.3% in 2015. The second biggest drop, -2.9% occurred in 2009 in the heart of the Great Recession, but they quickly recovered. A very significant trend started in 2013 as prices stabilized then fell in 2015. They essentially remained at this lower level until the beginning of the Pandemic Pricing surge in 2021. This surge produced the 2 highest annual inflation rates for this group: 2022 = +10.9%; 2021 = +7.8%.
  • National CPI – In 2022, prices reached double the level of 1992, with an average annual inflation rate of +2.5%. While inflation in Commodities segments, like Groceries and Gasoline get far more publicity, the Services group has slightly more influence over the National numbers. However, big changes in any large segment, like Gasoline or Groceries can definitely have an impact. The size and consistent inflation of Services has driven the National CPI up every year but 2009, -0.4%. The 2 biggest increases occurred in 2022 = +8.0%; 2021 = +4.7%. However, because of the frequency of purchases, inflation in Commodities is more noticeable. Let’s take a closer look.

The next graph compares 30 years of Commodity inflation to one of its subcategories – Pet Products. While the CPIs for individual Pet Industry Segments have only been tracked since 1997, the pricing of Pet Products (Pets, Food & Supplies) has been recorded since 1977. The US BLS recognized that Pets were an important part of U.S. Households long before there were any major Pet chains, SuperStores or even “Pet Parents”. Remember, in 1992 and earlier most pet products were purchased in Grocery stores. According to the Economic Census, this didn’t change until 1997.

As you can see the inflation patterns for Commodities and Pet Products were basically the same until 2008. Both turned up in 2008, but the Pet Products lift was the biggest single year increase from 1992>22 for Pet Products, +9.19%. This was followed by a +7.2% increase in 2009. Prices rose 17% in 2 years. In reaction to the Recession, Commodities prices fell -2.9% in 2009 and Pet Products fell -1.0% in 2010. Both recovered quickly and prices essentially flattened out for Commodities until 2021 and Pet Products until 2022. There was some minor turmoil as most of the deflationary years for both occurred during this “flat” period – Pet Products (4 of 6) and Commodities (3 of 5). For both the highest inflation occurred in 2022 – Pet Products (+9.18%) and Commodities (+10.9%). Commodities prices increased +19.6% from 2020 to 2022. While Pet Products still has the bigger cumulative increase at +74%, Commodities, at 71%, significantly narrowed the gap. Except for the timing of their big 2 year “lift” these 2 groups have a very similar pricing pattern.

Now let’s look at the impact of inflation on sales. Price Inflation can reduce the amount of product sold. At the very least it reduces the “real” amount of a sales increase. Consumers get less for their money. In our next graph we will track the sales for Total Retail from 1992 to 2022. We will factor inflation into the numbers to show the “real” increase in product sold over the years. We are using the All Commodities CPI in our calculations. It’s an accurate representation. The Census Bureau defines a retail outlet as one whose primary business is the sale of products to consumers. This ranges from restaurants to gas stations to department stores. Note: The outlet may also sell services but not a significant amount.

Actual Total Retail Sales quadrupled in 30 years from $2T to 8T. There were only 2 years when they declined 2008 & 2009, which was due to the onset of the Great Recession (Pink highlights). The market recovered in 2011. It took a total of 4 years to get back to 2007 Sales numbers. (Black Outline). It took 13 years for sales to double from $2T to $4T and another 13 to reach $6T. However, the Pandemic Recovery in 2021 & 2022 pushed the market from $6T to $8T in just 4 years. $1.9T of the lift occurred from 2020>2022 with $1.2T occurring in 2021 and $0.7T in 2022. These are the 2 largest annual increases from 1992>22. The average annual increase for Total Retail $ over 30 years was +4.8%.

The Commodities CPI increased by 71% in 30 years, an average annual inflation rate of +1.8%. Prices deflated in 5 years with the biggest drop, -3.3% occurring in 2015. The biggest lifts prior to the Pandemic period occurred in 2008, +4.3% and 2011, +5.3%. After the 2011 increase prices remained close to the +45% cumulative level until the big lifts in 2021 (+7.8%) and 2022 (+10.9%). Commodity Prices rose 19.6% in just 2 years. The biggest prior 2 year increase was +8.3% in 2010>11. The current lift is more than twice as large and must impact retail sales.

“Real” Total Retail Sales increased 136% from 1992 to 2022, an average annual increase of 2.9%. They declined in 3 years. The 2008 & 2009 declines mirrored the drops in Actual Sales but 2022 was different. Due to +10.9% inflation, Cumulative real sales declined despite a +9.1% increase in actual sales. There are other examples of the impact of inflation. Actual Sales recovered from the 2008>09 drops in 4 years. For real sales it took 2 years longer. Also, Actual Sales doubled in 13 years. It took 25 years for Real Sales. Finally, the goal is to always have over 50% of the cumulative actual sales increase to be real. This was true in Total Retail for 25 of 30 years. The percentage was below 50% from 2011>14 but hit bottom at 45% in 2022. Real sales is a measure of the amount of product sold. High inflation can negatively affect consumer spending. At first, they spend more but get less. If it continues, it can lead to a drop in spending.

Now, we’ll turn to the data that you’ve all been waiting for – the impact of Pet Products inflation on Pet Store Sales.

As you can see, this graph is different from the others. The primary reason is that monthly and annual sales data for Pet Store $ales is still not reported by the Census Bureau even though their own numbers from the Economic Census show that Pet Store sales exceed the amount sold by at least 6 other channels that are reported monthly. The data reported is from the Economic Census which occurs every 5 years. We will have the 2022 numbers in the Fall of 2024. To give you a 30 year look I gathered data going back to 1987. The data is plotted by Total Sales $ for the reporting years rather than by % of increase from 1987. The Real Sales $ were computed by factoring in cumulative Pet Products inflation from 1987. The US BLS has been gathering this CPI data monthly since 1977. This is a good CPI match as even with the growth of Services, Pets & Pet Products accounted for 93+% of Pet Store Sales in 2017, according to the Economic Census. The % shown next to the “real” $ reflects the amount of the Actual cumulative $ increase that is real.

The growth is beyond spectacular. From 1987 to 2017, Actual $ales increased by $17B, (1250%) with an average annual increase of +9.1%. This spectacular growth was due to a number of factors – the creation and growth of Pet Chains and SuperStores, the transition from Pet Owners to Pet Parents, Baby Boomers moving into their higher income years and the increasing personalization of our Pet Children. Real Sales growth was +9B, (660%) with an annual growth rate of +7.0% – still amazing! About the only negative to be found is in the definite drop in the percentage of actual growth that is real. In the 90s it was above 70%. It fell into the 60+% range at the start of the Millennium but since 2012 it has dropped into the low 50s. This was primarily driven by extreme inflation from 2006>09, +21%. Prices deflated -1.2% from 2012>17 which caused the slight increase in % so there is no doubt that inflation has a real retail impact. That leaves us to  wonder what will happen in 2022. We already know the CPI facts. Pet Product Prices only increased +3.8% from 2017>21 but then jumped +9.2% in 2022 and are now double what they were in 1987. We look forward to getting the Sales data. A first “peak” will come from the mid-year 2022 Consumer Expenditure Survey which will be released shortly.

Retail Channel Monthly $ Update – February Final & March Advance

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By 2021, the market had generally recovered from the impact of the pandemic. In 2022 & 2023, we were hit by extreme inflation, with some rates higher than we have seen in 40 years. Obviously, this can affect retail sales, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for February and then go to the Advance Report for March. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the February Final. All but Auto were down from last month, but all but Gas Stations were up vs February of 22 & 21. Considering inflation, all were really up for the month & Ytd vs 2022. Vs 2021 & 2019 only Auto & Gas Stations had any “real” negatives. Here are the specifics for the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The February Final is $2.9B more than the Advance. All were up. Restaurants: +$0.6B; Gas Stations: +$0.4B; Auto: +1.4B; Relevant Retail: +$0.6B. Except for Auto, sales were down from January as expected, but consumers continue to spend more vs last year in all but Gas Stations. In fact, Total Retail, Restaurants & Relevant Retail were positive in all measurements vs 22, 21 & 19. Auto was “really” down vs 21 and Gas Stations are really down Ytd vs 21 & 19. The most significant change is that the real sales for Relevant Retail vs the previous year are now positive for the first time in 10 months. They are now tied with Restaurants for 1st place in performance since 2019 but only 50% of their growth is real.

Now, let’s see how some Key Pet Relevant channels did in February in the Stacked Bar Graph Format

Overall– 8 of 11 were down from Jan but vs 22, 10 were up vs Feb and all Ytd. 4 were really down monthly & Ytd. Vs 2021, all had increases. 8 monthly were real and 7 Ytd. Vs 2019, Office/Gift/Souvenir was the only real negative.

  • Building Material Stores – The pandemic caused consumers to focus on their homes which has produced sales growth of 35.4% since 2019. Home Ctr/Hdwe has the most Ytd growth vs 2021, but Farm stores are the leaders vs 2022 & 2019. Prices for the Bldg/Matl group have inflated 23.7% since 2021 which has produced all negative real numbers vs 2022 & 2021. Importantly, only 24.0% of their 19>23 lift was real. It was only this high because half of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.6%, Real: 1.8%; Farm: 9.3%, Real: 3.4%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is over 3 times higher than for Drugs/Med products. Drug Stores are positive in all numbers vs 22, 21 & 19 and 71% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just barely positive vs 2019. Only 4.5% is real growth. Avg 19>23 Growth: Supermarkets: +6.0%, Real: +0.3%; Drug Stores: +4.1%, Real: +2.9%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are slightly up from January and positive in all other measurements. Their current inflation rate is 1.1% which is down sharply from 5.4% in 21>22. It was even higher in 20>21, +6.5%. However, 63% of their 52.5% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +11.1%; Real: +7.4%.
  • Gen Mdse Stores – Only $/Value Stores are up vs January, but actual sales were up for all channels vs 2022, 2021 & 2019. In real sales, the only negatives were in Ytd sales for Disc. Department Stores vs 22 & 21. They have the worst performance of any channel in all measurements and only 13% real growth since 2019. The other channels average 39%. Avg 19>23 Growth: SupCtr/Club: 6.7%, Real: 2.8%; $/Value Strs: +6.9%, Real: +3.0%; Disc. Dept.: +3.1%, Real: +0.4%
  • Office, Gift & Souvenir Stores – Sales are down from January. However, their sales growth since they started their recovery in the spring of 2021 has been strong enough to make them positive in all measurements vs 2022 & 2021. They are still really down vs 2019 but they are making progress. Avg Growth Rate: +1.7%, Real: -0.9%
  • Internet/Mail Order – Sales are down -6.4% from January but still a monthly record. They are positive for all other measurements, but their growth rate is only 51% of their average since 2019. However, 80% of their 99.2% growth since 2019 is real. Avg Growth Rate: +18.8%, Real: +15.8%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December then fell in Jan>Feb 2023. In fact, real sales are down vs February 2022, but all other measurements are positive. They are still the $ increase leaders vs 2021 and 75% of their 66.9% growth since 2019 is real. Average 19>23 Growth: +13.7%, Real: +10.8%. They remain 2nd in growth since 2019 to the internet. I’m sure that Pet Stores are contributing.

There is no doubt that high inflation is an important factor in Retail. In actual $, 10 channels reported increases in sales vs 2022 but 11 vs 2022. When you factor in inflation, the number with any “real” growth drops to 7 vs 2022 but 8 vs 2021 (in Jan it was only 4) This is a clear indication slowing inflation has lessened its impact at the retail channel level. Recent data indicates that Inflation again slowed a little. Let’s look at the impact on the Advance Retail $ales for March.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb then rose in March. Except for a dip by Gas Stations, all actual sales are positive. The biggest change is that real sales vs 21 are negative for all but Restaurants which shows the impact of cumulative inflation. BTW, Restaurants are positive in all measurements.

Overall – Inflation Reality March inflation vs 2022 fell below the $ increase rate for all but Relevant Retail. However, you see the impact of cumulative inflation as real sales are down for all but Restaurants vs 2021. Restaurants have the strongest performance in all measurements vs 2022, 2021 & 2019. The biggest negative is in Relative Retail. Monthly Real sales are down vs 2022 & 2021 and Ytd real sales are again down vs last year. Consumers pay more but buy less.

Total Retail – Every month since June 2020 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. As expected, sales dipped in Jan>Feb then rose in March. Inflation is slowing but so is sales growth. Sales are up 3.1% vs last year. That’s the lowest rate since 3.0% in February 2021. Also, only 38% of the 19>23 growth is real but that’s better than 9%, 21>23. March sales are actually really down -4.5% vs 2021. Inflation is slowing but it 1st hit 4% in March 2021. We are starting to see the cumulative impact. Avg 2019>23 Growth: +8.5%, Real: +3.4%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group in all measurements vs 22, 21 & 19. Inflation increased to 8.6% in March from 8.3% last month and is now 16.0% vs 21 and 20.3% vs 19. 47.5% of their growth since 19 is real but that is less than 59.6% of even greater growth since 21. Recovery started late but inflation started early. Avg 2019>23 Growth: +10.4%, Real: +5.4%. They just account for 13.7% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better but got worse in March. $ are up 0.4% vs 22 but are down vs 21. Ytd Real sales vs 2021 are also down. Their Ytd real sales vs 19 are still up but there is little improvement despite continued deflation. Avg 2019>23 Growth: +6.9%, Real: +1.1%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then dropped 17% in Mar. However, prices are still +22.5% vs 21. The deflation actually caused monthly & Ytd sales vs 22 to drop but real sales are up. However, all real sales vs 21 & 19 are still down. Avg 2019>23 Growth: +8.0%, Real: -1.0%. The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020. They led the way in Total Retail’s recovery, which became widespread across the channels. Sales got on a roller coaster in 2022. However, all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan>Feb had normal drops, but sales in March turned up. However, the increase was small so that real monthly sales & Ytd vs 22, along with monthly vs 21 were down. That means that real sales vs last year have been negative in 11 of the last 12 months. In fact, 50% of their 19>23 $ are real compared to only 4% for 21>23. Inflation is a cumulative problem that began in 2022. Their Avg 2019>23 Growth is: +8.6%, Real: +4.5%. The performance of this huge group is critically important. This is where America shops. The fact that real sales are down again is bad news.

Inflation is slowing slightly but the impact is still there. Sales increases are also slowing, and the fact that some real sales for Total & Relevant Retail have again turned negative is not a good sign. Restaurants are doing great while Auto & Gas Stations are still struggling despite ongoing deflation. However, the biggest concern is Relevant Retail. They may be moving back to Inflation Phase II, where Consumers spend more but the amount bought decreases. The sales increase rate is slowing even faster than inflation. This can lead to Phase III when sales actually drop. Let’s hope for a turnaround.

Here’s a more detailed look at March by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.6%, Real: +4.5%. All 11 channels were up from February but only 7 were up vs 22 & 6 vs 21. Only 3 had a “real” increase vs 22 and/or 21. The negative impact of inflation is very visible in this real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their $ are up from February and for all comparisons but vs March 21. However, their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.5%, Real: -2.1%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up from February and in all other measurements. Their real sales are down vs March 22 & 21 and Ytd vs 21. 34% of their 27.1% 19>23 lift is real. This shows the impact of inflation. Avg 19>23 Growth: +6.2%, Real: +2.2%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are up from February and in all measurements vs 22, 21 & 19. However, inflation hit them hard. $ Real sales are down for all but Ytd vs 2019 and only 4.6% of the growth since 2019 is real. Avg Growth: +6.0%, Real: +0.3%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are up from February and in all other measurements vs 22, 21 & 19. Their inflation rate is low so 74% of their 21.7% growth from 2019 is real. Avg 2019>23 Growth: +5.0%, Real: +3.8%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Sales are up vs February but down vs 22. After 3 months of all positive measurements, real sales are down vs March 21 & Ytd vs 22. 66% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.9%, Real:+2.6%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Sales are up from February & Ytd vs 22, 21 & 19 but down vs March 22 & 21. Their real sales are all down vs 22 & 21 and only 18% of their 19>23 growth is real. Avg 2019>23 Growth: +5.5%, Real: +1.1%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up vs February but down in all other measurements. However, real sales are up Ytd vs 22, 21 & 19. This only happened because of strong deflation, -6.3>-7.9%. Avg 2019>23 Growth: -1.7%, Real: +0.08%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. After 4 drops, Sales are up 25.5% from February. They are also up Ytd vs 21 & 19 but down in all other measurements. They have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 26% of their % sales growth since 2019 is real. Avg 2019>23 Growth is: +8.3%, Real: +2.4%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. $ales are up from February and in all other measurements but vs Mar 21. Real sales are up except vs 21. This is not bad, but it comes after 2 months of all positives. Their inflation is lower than most groups so 71% of their 42% growth since 2019 is real. Avg 2019>23 Growth: +9.2%, Real: +6.8%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up from February and for all but real March 23 vs 22. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 70% of their 52% 19>23 growth and 59% of their 21>23 growth is real – amazing! Their Avg 19>23 Growth is: 11.0%, Real: 8.1%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are up from February and all measurements are positive. 78% of their 91.8% growth since 2019 is real. Their Avg Growth: +17.7%, Real: +14.5%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Mar which should improve the Retail Situation. Sales were up from February for all channels but Gas Stations. Inflation continues to slow in most channels, which increases Real Sales – the amount of products sold. Some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling but a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is now below the lower inflation rate. This has produced negative real sales for most channels. This is evident in the Relevant Retail group as Real sales vs last year have again turned negative. However, it is also true for 8 of 11 smaller channels. After a brief respite, we may be moving back to Inflation, Phase II, increased $ales but a decrease in the amount sold. Hopefully, we can avoid Phase III, when $ales also decrease.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – March Update: Price increase slows to +9.4% vs 2022

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Inflation continues to be big news. The YOY increases in the monthly Consumer Price Index (CPI) are larger than we have seen in decades but are definitely slowing. March prices grew 0.3% from February and the CPI was still up +5.0% vs 2022, but down from +6.0% last month. The grocery pricing surge has also slowed. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +8.4%.  As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July and is still +9.4% in March, 88% higher than the national rate of 5.0%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from March 2021 to March 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In March Supplies prices fell slightly but all other segments are at their cumulative inflation peak.

In March 2021, the national CPI was only +3.1% and Pet prices were +1.5%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated, except for a small October dip in Veterinary. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>Mar, prices in all but Supplies grew every month. Total Petflation since Dec 2019 has been above the U.S. CPI since November.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Mar but 39% of the overall 17.5% increase since 2019 happened from January>June 2022.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 2020 > Sept 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued. 92% of the 20.6% increase occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct to a new record high. Prices stabilized in Nov>Dec but turned up again in Jan>Feb, reaching a new record high. In March, they fell -0.3%.
  • Pet Services – Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It has turned up again July>Mar but Services remains in 3rd place among Pet Industry Segments.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July and set new records in January>March.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December then turned up again in January and February as all segments increased prices. Prices grew again in March as all, but Supplies had increases. It has been ahead of the cumulative U.S. CPI on our 2019>23 chart since November.

Next, we’ll turn our attention to the Year over Year inflation rate change for March and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Although Petflation slowed in March, it is now 88% higher than the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.3% vs February and were up 5.0% vs March 2022. The Grocery increase is below double digits at 8.4% but is still a big negative. Inflation usually continues in March so it’s not surprising that 6 of 9 categories had increased prices from last month, compared to 8 in February. 4 of the 6 increases were 0.7+%, all from the Pet Industry – Total Pet: 0.7%; Pet Food: 1.6%; Veterinary: 0.9%; Pet Services: 0.8%. The overall national YOY monthly inflation rate for March is down from February, but it is also much lower than the 21>22 rate. 4 categories – Pet Supplies, Veterinary, Medical Services and Food at home have a similar pattern. In all other categories the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019 for all but Haircuts/Services. In our 2021>2023 measurement you also can see that over 70% of the cumulative inflation since 2019 occurred in the current surge for all categories but Veterinary Services, Pet Services, Medical Services and Haircuts/Personal Services. Of Note: They are all service expenditures, not products. The Pet Supplies Segment has a unique situation. The 21>23 inflation surge provided 114% of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 20>21.

  • U.S. CPI– Prices are +0.3% from February. The YOY increase is down to +5.0%. It peaked at +9.1% back in June. The targeted inflation rate is <2% so we are still over 2.5 times higher than the target. However, a 9th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is 14.0%, 75% of total inflation since 2019. How many households “broke even” by increasing their income by over 14% in 2 years?
  • Pet Food– Prices are +1.6% vs February and 14.4% vs March 2022. They are also 71% higher than the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were only 5.4% above the 2019 level, but that increase is still an incredible 6.9 times the pre-pandemic 2.1% increase from 2018 to 2019. The 2021>2023 inflation surge generated 93% of the total 21.3% inflation since 2019.
  • Food at Home – Prices are down -0.2% from February. The monthly YOY increase is 8.4%, down from 10.2% in February and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 24.5% Inflation for this category since 2019 is 31% more than the national CPI and remains 2nd to Veterinary. 78% of the inflation since 2019 occurred from 2021>2023. The pattern now mirrors the national CPI but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies – Prices are down -0.3% from February. That’s the 1st decrease since November. They still have the lowest increase since 2019 and remain in last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. but prices fell slightly in March.
  • Veterinary Services – Prices are +0.9% from February. They are +7.7% from 2022 and are now in 3rd place behind Food & Services in the Pet Industry. However, they are the leader in the increase since 2019 with 26.9% compared to Food at home at 24.5%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 65% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In March prices fell -0.5% from February and were +1.0% vs 2022, the lowest rate from 2019>23. Medical Services are not a big part of the current surge as only 34% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. March 23 prices were up +0.8% from last month and +8.0% vs 2022, the 2nd highest rate next to January’s +8.4%. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 61% of the total since 2019 occurred from 21>23, down from 73%.
  • Haircuts/Other Personal Services – Prices are +0.2% from Feb. and +5.4% from 2022, the 2nd highest rate since 2019. Inflation had its biggest increase in 20>21 so just 50% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is 25% higher than the 21>22 rate, 88% ahead of the National CPI and the +9.4% is the highest March rate in history. Prices increased in all segments but Supplies vs February so Total Pet was up 0.7%. This was expected as a Feb>Mar increase in Petflation has happened in 23 of the last 26 years. Food is the runaway leader, but the 22>23 inflation rate for all but Supplies exceeds the 21>22 rate. Pet Food has generally been immune as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other Segments.

Now, let’s look at the YTD numbers.

The increase from 2022 to 2023 is the biggest for 5 of 9 categories. The 22>23 rate for Haircuts/Services is essentially tied with 21>22. The Total CPI, Pet Supplies & Medical Services are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.2%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 27.5% from 21>22 but is still 32% more than the average increase from 2019>2023, and more than 3 times the average annual increase from 2018>2021. 75% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 90.7% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 71%. You can see the impact of supply chain issues on the Grocery category as 79% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – While the inflation rate is down slightly at about 5.6%, prices remain near February’s record high. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 114% of this increase happened from 2021>23. Prices are up 12.9% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they are only the 4th highest since 2021. At +5.9%, they have the highest average annual inflation rate since 2019 but Veterinary is unique. They are the only category in which the inflation rate grew steadily every year from 2019>2023. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have deflated monthly to reach a rate actually 12.5% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Mar. The January increase of 8.4% was the largest in history. YTD March remained stable at 8.0%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 11% below the 2020>21 peak but is 59% more than 2018>19. Consumers are paying 20% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices have continued to climb. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, then fell in Mar. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.3%, 77.6% more than the National rate. In March 22 it was 27.5% less than the CPI.

Petflation is still very strong. Let’s put the numbers into perspective. Petflation fell from 10.9% in February to 9.4% in March. This is below the record 12.0% set in November, but it is a record for the month. Some good news is that after 7 straight months over 10%, we are finally out of the double digits. However, the current rate is 6 times more than the 1.6% average rate from 2010>2021. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. This recognized spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 9.4% from 2022 but they are up 17.6% from 2021 and 22.0% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. Let’s hope for a repeat.

Retail Channel Monthly $ Update – January Final & February Advance

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By 2021, the market had generally recovered from the impact of the pandemic. In 2022, we were hit by extreme inflation, with rates higher than we have seen in 40 years. Obviously, this can affect retail sales, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for January and then go to the Advance Report for February. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. Starting with February, the charts will show 11 separate measurements so we switched to a stacked bar format for the channel chart.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019. Note: January Monthly & Ytd are obviously the same. We will include actual and Real data for Jan 2023 vs 2019 for this report.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the January Final. All were down from last month, but all were up vs January of 22, 21 & 19. Considering inflation, only Relevant Retail was really down for the month vs 2022. Vs 2021 & 2019 the real data for the big groups associated with cars was not good. Here are the specifics for the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The January Final is $8.2B more than the Advance. Restaurants had the only negative: -$0.5B; Gas Stations: N/C; Auto: +1.3B; Relevant Retail: +$7.3B. Sales are down from December as expected but consumers continue to spend more vs last year. At least for the 1st month, the Real numbers vs 2022 are positive except for a slight dip by Relevant Retail. Auto & Gas Stations are still really down vs 2021 and Gas Stations sold less product than they did in 2019. The inflation impact on Relevant Retail is concerning. Their Real $ales vs the prior year have now been negative for 10 straight months. They have also fallen behind Restaurants to 2nd place in performance since 2019 but 58.6% of their growth is Real.

Now, let’s see how some Key Pet Relevant channels did in January

Overall– All were down from December but up vs 2022. Only 3 were really down. Vs 2021, all had increases but only 4 were real – the impact of cumulative inflation. Vs 2019, Office/Gift/Souvenir & Supermarkets were only real negatives.

  • Building Material Stores – The pandemic caused consumers to focus on their homes which has produced sales growth of 31.1% since 2019. Home Ctr/Hdwe has the most growth since 2021 but Farm stores are the leaders vs 2022 & 2019. Prices for the Bldg/Matl group have inflated 21.4% since 2021 which has produced a lot of negative real numbers. Importantly, only 22.8% of their 19>23 lift was real. It was only this high because half of the lift came from 20>21, prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 6.8%, Real: 1.5%; Farm: 8.2%, Real: 3.2%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is 4 times higher than for Drugs/Med products. Drug Stores are positive in all numbers vs 22, 21 & 19 and 75% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022, 2021 and now 2019. Avg 19>23 Growth: Supermarkets: +5.5%, Real: -0.2%; Drug Stores: +4.0%, Real: +3.0%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down 44.9% from December but up vs 2022, 2021 & 2019. Their current inflation rate is 1.5% which is down sharply from 5.4% in 21>22. It was even higher in 20>21, +6.5%. However, 75% of their 55.2% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +11.6%; Real: +9.0%.
  • Gen Mdse Stores – All channels were down from December but up vs 2022, 2021 & 2019. $/Value store are the only channel really up vs 2022. Vs 2021 all channels are really down. As expected, Disc. Dept Stores have the worst performance of any channel in all measurements. The other channels have 47% real growth since 2019. Avg 19>23 Growth Rate: SupCtr/Club: 6.8%, Real: 3.4%; $/Value Strs: +6.2%, Real: +2.8%; Disc. Dept.: +3.7%, Real: +1.3%
  • Office, Gift & Souvenir Stores – Their recovery didn’t start until the spring of 2021. Sales are down 37.2% from December but their sales growth has been strong enough to make them positive in all measurements vs 2022 & 2021. They are still really down vs 2019 but they are making progress. Avg Growth Rate: +1.3%, Real: -1.2%
  • Internet/Mail Order – Sales are down 21.2% from December but still a monthly record. They are positive for all other measurements, but their growth rate is only 53% of their average since 2019. However, 90% of their 99.7% growth since 2019 is real. Avg Growth Rates: +18.9%, Real: +17.3%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – This is a group of specialty retailers. Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level in 2021 as annual sales reached $100B for the first time. In 2022 their sales dipped in January, July, Sept>Nov, rose in December and then fell 21% in January. All other measurements are very positive, and they are still the $ increase leaders vs 2021. Plus, 85% of their 68.1% growth since 2019 is real. Average 19>23 Growth: +13.9%, Real: +12.1%. They are 2nd in growth since 2019 to the internet. I’m sure Pet Stores are helping.

There is no doubt that high inflation is an important factor in Retail. In actual $, all 11 channels reported increases in sales vs 2022 & 2021. When you factor in inflation, the number with any “real” growth falls to 8 vs 2022 but only 4 vs 2021. This is a clear indication of the ongoing strong impact of cumulative inflation at the retail channel level. Recent data indicates that Inflation again slowed a little. Let’s look at the impact on the Advance Retail $ales for February.

We have had memorable times since 2019, including the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. As expected, sales fell for all groups in January and now February. The only other February negatives are from Auto or Gas Stations. This comes despite actual price deflation in both. The other big groups and Total Retail are positive in all measurements vs 2022, 2021 & 2019.

Overall – Inflation Reality February inflation vs 2022 fell below the $ increase rate for all but Gas stations. However, you see the impact of cumulative inflation as real sales are down for Gas Stations and Auto vs 2021. Restaurants have the strongest performance in all measurements vs 2022, 2021 & 2019. There is another positive. Although the increase was small, real Ytd sales vs last year are finally up for both Total & Relevant Retail.

Total Retail – Every month since June 2020 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. As expected, sales dipped in January & February. February is usually the low point for retail sales, but all measurements are positive vs 2022, 2021 & 2019. Inflation is slowing but so is sales growth. Sales are up 5.6% vs last year. That’s the lowest rate since 3.0% in February 2021. Also, only 46% of the 19>23 growth is real but that’s better than 26%, 21>23. Avg 2019>23 Growth: +8.6%, Real: +4.2%. Inflation slows but continues to have a cumulative impact.

Restaurants – They were hit hard by the pandemic and didn’t truly start to recover until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They have the best performance of any big group in all measurements vs 2022, 2021 & 2019. Inflation increased to 8.3% for February from 8.1% last month and is now 15.5% vs 2021 and 20.0% vs 2019 but 59.8% of their 49.7% growth since 2019 is real. Avg 2019>23 Growth: +10.6%, Real: +6.7%. They only account for 13.6% of Total Retail $ales, but their performance helps to improve the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 has started off a little better. Sales are up vs 2022, 2021 & 2019. Plus, real sales are only down vs 2021. After 8 negative months, Jan>Feb real Ytd Sales vs 2019 are positive. Prices have now deflated for 3 straight months. Avg 2019>23 Growth: +7.2%, Real: +1.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices deflated in December & February. However, it is still +35.7% vs 2021. Monthly sales vs the previous year actually decreased in February for the 1st time in 2 years. Real sales are even worse. Monthly, they are down vs 2022 & 2021 and Ytd they are down vs 2021 & 2019. Avg 2019>23 Growth: +8.6%, Real: -1.8%. The numbers show the cumulative impact of inflation. In 2023 consumers paid 39% more to buy 7% less gas than in 2019.

Relevant Retail – Less Auto, Gas and Restaurants – This group accounts for 60+% of Total Retail $. It has a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020. They have led the way in Total Retail’s recovery, which became widespread across the channels. Sales went on an up/down roller coaster in 2022. However, all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023 Jan>Feb had normal drops, but sales in February set a record and were up in all measurements vs 2022, 2021 & 2019. After 10 straight negative months, real sales vs last year have now turned positive. In fact, 58% of their 19>23 $ are real compared to only 23% for 21>23. This shows that inflation is a cumulative problem that began in 2022. Their Avg 2019>23 Growth: +8.6%, Real: +5.2%. The performance of this huge group is critically important. This is where America shops. The fact that real sales are now positive is great news.

Inflation is slowing slightly but the impact is still there. Sales increases are also slowing, but the fact that real sales for Total & Relevant Retail are finally both slightly positive is a good sign. The biggest concern is with Auto & Gas Stations. Their extreme inflation is now deflating but they are struggling. Restaurants were hit hard by the pandemic, but they are now by far the best performers. For Relevant Retail, we may be moving back to Inflation Phase I, where Consumer spending grows but the amount bought still increases – just at a lower rate. Let’s hope that inflation continues to slow.

Here’s a more detailed look at February by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.6%, Real: +5.2%. 9 of 11 channels were down from January but 10 were up vs 2022 & 2021. 7 were really up vs 2022 & 8 vs 2021. The negative impact of inflation is less but still there in the real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their $ are up from January and for the month & Ytd vs 2022 & 2021 & 2019. However, their real sales are down vs February 2022 & Ytd vs 2022 & 2019. Avg 2019>23 Growth: +0.9%, Real: -1.9%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. Sales are down from January but up in all other measurements. 45% of their 29.3% 19>23 lift is real, but that’s much better than the 6% from 21>23. This shows the impact of inflation. Avg 19>23 Growth: +6.6%, Real: +3.2%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from January but up vs 22, 21 & 19. However, inflation hit them hard. $ Real sales are down for all but Ytd vs 2019 and only 4% of the growth since 2019 is real. Avg Growth: +5.9%, Real: +0.2%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from January but are up in all other measurements vs 22, 21 & 19. Their inflation rate is low so 77% of their 19.8% growth from 2019 is real. Avg 2019>23 Growth: +4.6%, Real: +3.6%.
  • Clothing and Accessories – They were nonessential, and clothes mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Sales grew after the big drop in January and for the 3rd straight month all other all measurements are positive. 75% of their 2019>23 growth is real. Avg 2019>23 Growth: +4.5%, Real:+3.5%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Sales are down from January but up vs 22, 21 & 19. However, their monthly real sales are down vs 22 & 21 and Ytd vs 21. Only 25% of their 19>23 growth is real. Avg 2019>23 Growth: +5.7%, Real: +1.5%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are down in all measurements except vs February 2021. However, all real sales are up. This only happened because of strong deflation, -6>8%. Avg 2019>23 Growth: -1.6%, Real: +0.06%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Sales fell Nov>Feb but are still up vs 22, 21 & 19. Inflation actually increased to 11.8% from 9.6% in January. Real sales are negative in all measurements but Ytd vs 2019. Also, only 30% of their Ytd 35.2% sales growth since 2019 is real. In December 2022, it was 54%. Their Avg 2019>23 Growth is: +7.8%, Real: +2.5%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. February $ are down from January but they are positive in all other measurements for the 2nd straight month. Inflation in this group is lower than most groups and most comes from Sporting Goods. 78% of their 41.4% growth since 2019 is real. Avg 2019>23 Growth: +9.0%, Real: +7.2%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are down from January but up for all other measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 79% of their 50.8% growth since 2019 is real, which is also 2nd to Nonstore. Their Avg 19>23 Growth is: 10.8%, Real: 8.8%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from January but all other measurements are up. 87% of their 88.5% increase since 2019 is real. Their Avg Growth: +17.2%, Real: +15.4%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Feb which brought a significant improvement to the Retail Situation. Sales were down from January for almost all channels, but this is no surprise as February is often the sales low point of the year.  Inflation continues to slow in most channels, which increased Real Sales – the amount of products sold. Some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling but most other channels are showing a marked improvement. This is evident in the Relevant Retail group as Ytd Real sales vs last year turned positive after 10 straight negative months. In fact, all their measurements vs 2022, 2021 & 2019 were up. This pattern was duplicated by 6 of 11 major retail channels. Inflation is still high and the rate of sales increase is lower but we may be turning the corner in our struggle against the pricing tsunami that has hit the U.S. Retail Market.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. We have expanded the data to include the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

 

Petflation 2023 – February Update: Price increase grows to +10.9% vs 2022

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Inflation continues to make headlines. The YOY increases in the monthly Consumer Price Index (CPI) are larger than we have seen in decades but are slowing a little. February prices grew 0.6% from January and the CPI was still up +6.0% vs 2022, but down from +6.4% last month. The grocery price surge also slowed but they’re still up 10.2% over 2022. That’s 12 straight months of double-digit YOY monthly percentage increases. These are the first 10+% increases since 1981. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July and is +10.9% in February, 81.7% higher than the national rate of 6.0%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>21, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from February 2021 to February 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In February Supplies passed their old November pricing high so all segments are now at their cumulative inflation peak.

The pandemic hit home in 2020. In February 21, the national CPI was only +2.4% and Pet prices were +1.4%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated, except for a small October dip in Veterinary. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>Feb, all inflated and Total Petflation since Dec 2019 has been above the U.S. CPI since November.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Feb but 40% of the overall 18.6% increase since 2019 happened from January>June 2022.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 2020 > Sept 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued. 91% of the 18.6% increase occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct to a new record high. Prices stabilized in Nov>Dec but turned up again in January and reached a new record high in February.
  • Pet Services – Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It has turned up again July>Feb but again fell behind Food so it is in 3rd place among Pet Industry Segments.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July and set new records in January & February.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs but Petflation grew again from Jul>Nov. It slowed in December then turned up again in January and February as all segments increased prices. It has been ahead of the cumulative U.S. CPI on our 2019>2023 chart since November.

Next, we’ll turn our attention to the Year over Year inflation rate change for February and compare it to last month, last year and to previous years. We also added a new measurement, showing the total inflation from 2021 to 2023. Although national inflation is slowing, it’s not for Pet. This will allow you to see the cumulative amount of the current pricing surge. You can compare the inflation rates of 22>23 to 21>22 but also see how much of the total inflation since 2019 came from the ongoing trauma. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.6% vs January and were up 6.0% vs February 2022. The Grocery increase is down to 10.2% but is still a big negative. Prices often rise early in the year so it’s not surprising that 8 of 9 categories had increased prices from last month. 7 of the increases were 0.5+%. Last month there were 5 but only 1 in December. 3 of the increases were over 1.0%, all from the Pet Industry – Total Pet: 1.5%; Pet Food: 1.2%; Veterinary: an incredible 2.5%. The overall national YOY monthly inflation rate is slightly down from January, but it is significantly down vs the 21>22 rate. 3 categories – Pet Supplies, Medical Services & Haircuts have a similar pattern. In all other categories the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019. In our new 21>23 measurement you also can see that over 70% of the cumulative inflation since 2019 occurred in the current surge for all categories but Veterinary, Medical Services and Haircuts & Personal Services. The Pet Supplies Segment has a unique situation. The 21>23 inflation surge provided 116% of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 20>21.

  • U.S. CPI– Prices are +0.6% from January. The YOY increase is down to +6.0%. It peaked at +9.1% back in June. The targeted inflation rate is <2% so we are still over 3 times higher than the target. However, an 8th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is 14.4%, 76% of total inflation since 2019. How many households “broke even” by increasing their income by over 14% in 2 years?
  • Pet Food– Prices are +1.2% vs January and 15.2% vs February 2022. They are also 49% higher than the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were only 3.0% above the 2019 level, but that increase is still an incredible 8.9 times the pre-pandemic 1.7% increase from 2018 to 2019. The 2021>2023 inflation surge generated 91% of the total 21.3% inflation since 2019.
  • Food at Home – Prices are up 0.3% from January. The monthly YOY increase is 10.2%, down slightly from 11.3% in January but considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.0% Inflation for this category since 2019 is 32% more than the national CPI but now 2nd to Veterinary. 79% of the inflation since 2019 occurred from 2021>2023 but the pattern is different from the national CPI. Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies – Prices are up +0.5% from January. That’s 3 straight monthly increases after a dip in November. They still have the lowest increase since 2019 and now have fallen to last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. However, 3 straight months of increases has pushed them to a new record high in February.
  • Veterinary Services – Prices are +2.5% from January. They are +10.3% from 2022 and are in 2nd place behind Food in the Pet Industry. However, they are now the leader in the increase since 2019 with 26.4% compared to Food at home at 25.0%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge but only 61% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In February prices fell -0.5% from January and were +2.1% vs 2022, the lowest rate since 2019. Medical Services are not a big part of the current surge as only 34% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. February 23 prices were up +0.5% from January and +7.5% vs 2022. The rate has slowed but prices still reached a new all-time high. Their inflation is tied to the current surge as 73% of total since 2019 occurred from 2021>2023.
  • Haircuts & Other Personal Services – Prices are +0.6% from January and +4.8% from 2022, but this is only the 3rd highest rate since 2019. Inflation began to grow in 20>21 and just 51% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is double the rate of last year, 81.7% ahead of the National CPI and the +10.9% is also the highest February rate in history. Prices increased in all segments vs January so Total Pet was up 0.5%, which was expected. A Jan>Feb increase in Petflation has happened in 25 of the last 26 years. Food is the runaway leader, but the 22>23 inflation rate for all but Supplies exceeds the 21>22 rate. Pet Food has generally been immune as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other Segments.

Now, let’s look at the YTD numbers.

The increase from 2022 to 2023 is the biggest for 5 of 9 categories. The 22>23 rate for 3 categories is essentially tied with 21>22. Only the Total CPI is significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.3%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 19.5% from 21>22 but is still 41% more than the average increase from 2019>2023, and more than 3 times the average annual increase from 2018>2021. 76% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Inflation continues to grow stronger. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 89.5% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 74%. You can see the impact of supply chain issues on the Grocery category as 79% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – While the inflation rate has stabilized at about 6.2%, prices reached a record high in February. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 114% of this increase happened from 2021>23. Prices are up 12.9% from their 2021 “bottom”.
  • Veterinary Services – Passed Food at Home for the top spot in inflation since 2019. They are the only segments on the chart with a 5+% average annual inflation rate since 2019. However, Veterinary is unique. They are the only category in which the inflation rate grew steadily every year until 2023 when it has almost doubled. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2022>23 inflation has stabilized at a rate only 8% higher than the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Feb. The January increase of 8.4% was the largest in history. YTD February is down slightly to 8.0%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 11% below the 2020>21 peak but is 51% more than 2018>19. Consumers are paying 20% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices have continued to climb. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, then rose again Dec>Feb. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.8%, 74.2% more than the National rate. In March 22 it was only 72.5% of the CPI.

Petflation is growing stronger. Let’s put the numbers into perspective. The 10.9% February 2023 increase in Total Petflation is below the record 12.0% set in November, but it is still a record for the month. We’ve also now had 7 consecutive months over 10%. The last time that petflation exceeded 10% was 10.3% in 2009. The current rate is more than 7 times the 1.5% average rate from 2010>2021. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from personnel from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. There is another fact that just came out that is relevant to our spending question. The US BLS recently decided to update the CPI annually rather than every 2 years based upon each expenditure’s share of total expenditures. I worked with them to update the CPI of my specially created retail aggregates. During our conversations, they noted that Pet expenditures in 2021 had one of the biggest share gains of any group. Apparently, Pet Parents are reallocating their $ to prioritize their “children’s” needs. This is not unexpected. We’ll see if this behavior is impacted by continued high inflation.