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
- CPI change from the previous month.
- Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
- Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
- Average annual Year Over Year inflation rate from 2019 to 2023
- 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 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.