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. November prices fell -0.1% from October. The CPI was still up +7.1% vs 2021, but down from +7.7% last month. The grocery price surge also slowed but they’re still up 12.0% over 2021. That’s 9 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. National inflation has slowed since July, but Petflation has increased, passing the National rate in July and is +12.0% in November, 69.0% higher than the national rate of 7.1%. We need to look a little 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 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
- CPI change from the previous month
- Inflation changes for recent years (20>21, 19>20, 18>19)
- Total Inflation for the current month in 2022 vs 2019
- Average annual Year Over Year inflation rate from 2019 to 2022
- YTD comparisons
- 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 November 2020 to November 2022. 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 those from 12 and 24 months earlier are included as are the year-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons.
The pandemic hit home in 2020. In November, the national CPI was only +1.3% and Pet prices were +0.1%. As you can see, 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 August>October Petflation accelerated, except for a miniscule dip in Veterinary in October. In November, Services and Food prices surged, Veterinary stabilized, but Supplies fell. However, Total Petflation since December 2019 passed the National CPI lift for the 1st time.
- 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/Aug 2022. 43% of the overall 15.9% increase since 2019 happened from Jan>June 2022.
- Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 90% of the 16.6% increase has happened since January.
- 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 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. They plateaued from February> May, turned up in June, flattened in July, turned up in Aug>Oct then fell in November.
- 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>Nov.
- Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December which put them above the overall CPI. In May prices fell and stabilized in June. Prices turned up again and despite an October dip they have been above the National CPI since July.
- Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 prices surged. The segments had mixed up & downs Mar>Jun but Petflation has accelerated since July and passed the U.S. CPI in November.
Next, we’ll turn our attention to the Year over Year inflation rate change for November and compare it to last month, last year and to previous years. We’ve added some human categories to put the pet numbers into perspective.
Overall, Prices were -0.1% vs October but were up 7.1% vs November 2021. The Grocery increase is down to 12.0% which is still a big negative but there is another area of concern. 6 of 9 categories had increases from October. 4 were over 0.5%, 3 were Pet. The U.S. CPI rate is slowing but Petflation, especially in Food & now Services, is getting worse.
- U.S. CPI– Prices are -0.1% from October. The YOY increase is +7.1%, down from the 9.1% peak in June. The targeted inflation rate is <2% so we are still about 4 times higher than the target. However, a 5th slight decline is good news.
- Pet Food– Prices are +0.8% vs October and 15.7% vs Nov 21. They are now 31% higher than the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were essentially at 2019 levels, but that increase is still over 4 times the pre-pandemic 3.7% increase from 2018 to 2019.
- Food at Home – Prices are down -0.04% from October. The increase from 2021 is 12.0%, down slightly from 12.4% last month. Inflation for this category since 2019 is the highest on the chart and is 49% more than the national CPI.
- Pets & Supplies – Prices fell -0.4% from October, the 2nd biggest decrease overall and the only one in Pet. They still have the lowest increase since 2019 but are still the 3rd highest in monthly increase vs 2021 for Pet Segments.
- Veterinary Services – November prices rose +0.1% from October. They are +11.0% from 2021 and trail only Food in the Pet Industry. They also remain 2nd in the increase since 2019 with 19.2% compared to Food at home at 23.4%.
- Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 2021. In November prices fell again and 2022 prices are now 14% below the pre-pandemic 2018>19 rate.
- Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. November prices spiked, +1.1% from October and +7.4% vs 2021, reaching yet another new record high.
- Haircuts & Other Personal Services – Prices are +1.4% from Oct. and +6.8% from 2021. They are +16.9% since 2019.
- Total Pet– Petflation is strong, 3.4 times the rate of last year and is 69.0% ahead of the National CPI. All but Supplies increased prices in November, but inflation is still primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying a lot and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.
Now here’s a look at Year-to-Date numbers. How does 2022 compare to previous years…so far?
The increase from 2021 to 2022 is the biggest for 8 of 9 categories. The average annual increase since 2019 is 3.4% or more for all but Pet Food & Pet Supplies. This is largely due to deflation in the 1st half of 2021.
- U.S. CPI – The current increase is still almost double the average increase from 2019>2022, but nearly 4 times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
- Pet Food – Inflation is growing stronger, especially after deflation in the 1st half of 2021 kept YTD prices low.
- Food at Home – The 2022 YTD inflation beat the U.S. CPI by 41%. You can see the impact of supply chain issues.
- Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a “flat” 2021, it is significant and just behind Food & Veterinary in the Pet Industry.
- Veterinary Services – Trails only Food at Home in inflation since 2019 and is the only segment on the chart with a 3+% inflation rate each year 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 prices surged but have now slowed. However, the inflation rate is still 26% higher than pre-pandemic 2018>19.
- Pet Services – May 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>Nov. The November YTD increase of 6.2% is the largest in history. Demand has grown for Pet Services while the availability has decreased, 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, prices turned up again. The YTD rate just passed 2020>21 and is 96% more than 2018>19. Consumers are paying over 15% 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, then fell in November. The Services segments have had ups & downs but are generally inflating. The net is a November YTD Petflation increase vs 2021 of 8.8%, ahead of the high 8.1% National rate. In March, it was only 72.5% of the CPI.
Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 8.8% current YTD increase in Total Pet is still below the 8.9% record set in 2009 but about 6 times more than the 1.5% avg since then. Pet spending continues to move to higher income groups, but the impact of inflation varies by segment. Supplies is the most affected as many categories are 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 reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.