Petflation 2024 – January Update: Down to +4.7% vs Last Year

Inflation slowed in January. The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec but turned up in January. However, the CPI actually decreased to +3.1% from +3.4% due to a big monthly price lift in 2023. Grocery inflation continues to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +1.2%, 11 consecutive months below 10%. As we have learned, 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.

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 considerably since June 2022, but Petflation generally increased until June 2023. It passed the National CPI in July 2022 and at 4.7% in January, it is still 51.6% above the national rate of 3.1%. 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 24 vs 23 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>23, 21>22, 20>21, 19>20, 18>19)
  3. Total Inflation for the current month in 2023 vs 2019 and vs 2021 to see the full inflation surge.
  4. Average annual Year Over Year inflation rate from 2019 to 2023
• YTD comparisons (Since it is January, this month’s numbers are the YTD rate.)

In our first graph we will track the monthly change in prices for the 24 months from January 22 to January 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In January, Pet prices were up from last month as lifts in Services & Supplies overcame drops in Food & Veterinary.

In January 22, the cumulative CPI was +9.4% and Pet prices were +5.6%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation took off. Food prices grew consistently but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this was reversed. In August all but Services fell. In Sep/Oct this was reversed. In November, all but Food & Vet fell. In December Supplies & Vet  drove Total Pet prices up. In January, Food & Vet prices fell while Supplies & especially Services prices surged. Note: With cumulative inflation, all but Supplies are now at or within 0.4% of their pricing peak.

• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep, dipped in Oct>Dec then rose in Jan. but 30% of the 22.4% increase in the 49 months since December 19 happened in the 6 months from Jan>Jun 22 – 12.2% of the time.
• Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 23. They have essentially stabilized at this record level. 93% of the 22.9% increase has occurred since 2021.
• Pet Supplies – Supplies prices were high in Dec 19 due to added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to Dec 19 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued in Feb>May, grew 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 23. They fell in March, peaked at a new record in May, then continued their rollercoaster ride with lifts in Dec>Jan.
• Pet Services– Normally inflation is 2+%. Perhaps due to closures, the rate slowed in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. It was stronger in 2022 but it got on a rollercoaster in Mar>Jun. It turned up again Jul>Mar 23 but the increase slowed in April. Prices fell -0.3% in May, turned up Jun>Aug, fell in Sep>Dec. then surged to a new record high in January.
• Veterinary – Inflation has been consistent. Prices turned up in March 20 and grew through 21. A surge began in December 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and even with dips, they have stayed above the CPI since July 22. In 23 prices grew Jan>May, stabilized Jun>Jul, fell in Aug, grew Sep>Dec (Record high) then fell in January.
• Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, fell in Nov then grew in Dec>Jan to a new record high. The January lift came from Services (+5.6%) and Supplies (+0.7%) which overcame drops in Food & Vet. However, the YOY CPI fell from 5.1% to 4.7%.

Now, we’ll turn our attention to the Year Over Year inflation rate change for January and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation slowed to 4.7%, down from 5.1% in December but it is still 1.5 times higher than the National rate. The chart will allow you to compare the inflation rates of 23>24 to other years but also see how much of the total inflation since 2019 came from the current pricing surge which took off in 2022. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.5% from December but were +3.1% vs January 23, down from +3.4% last month. Grocery inflation is down again, to +1.2% from +1.3%. 7 of 9 categories had a price increase from last month – only Vet & Pet Food prices fell. There were 5 increases in December. Pet Services had a big turnaround. After 4 monthly drops, prices rose 5.6%. The national YOY monthly CPI rate of 3.1% is only 48% of the 22>23 rate and 41% of 21>22. The 23>24 inflation rate is below 22>23 for all categories but Veterinary Services. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 95.6% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +4.9% while the CPI for Commodities is +0.1%. Services are driving virtually all of the current 3.1% inflation.

• U.S. CPI– Prices are +0.5% from December. The YOY increase is 3.1%, down from 3.4%. It peaked at +9.1% in June 2022. The targeted inflation rate is <2% so we are still 55% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 2 lifts – not good news! The current rate is 52% below 22>23 but the 21>24 rate is still 17.9%. That is 79.6% of the total inflation since 2019. Inflation was very low in early 2021.
• Pet Food– Prices are -0.1% vs December and +4.8% vs January 23, down from 5.1%. However, they are still 4 times the Food at Home inflation rate. The YOY increase of 4.8% is being measured against a time when prices were 17.3% above the 2019 level, but that increase is still 4 times the pre-pandemic 1.2% increase from 2018 to 2019. The 2021>2024 inflation surge has generated 90.2% of the total 26.5% (Now: 2^nd highest) inflation since 2019.
• Food at Home – Prices are up +0.7% from December, but the monthly YOY increase is 1.2%, down from 1.3% last month and radically lower than Jul>Sep 2022 when it exceeded 13%. The 26.4% Inflation for this category since 2019 is 17% more than the national CPI and is in 3^rd place behind Vet & Pet Food. 79.5% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were up 0.7% from December and 0.5% vs January 2023. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr/May to a new record high, fell in Jun>Aug, grew in Sep>Oct, fell in November, then grew sharply in Dec>Jan.
• Veterinary Services – Prices are -0.1% from December, but they are +9.6% from 2023, again the highest rate in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 36.5% compared to Pet Food, 26.5% and Groceries, 26.4%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 23 & now 24, so 68% of the cumulative inflation since 2019 occurred from 2021>24.
• 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. Prices grew 1.0% from December and after 8 straight months of deflation are now +0.6% vs last year. Medical Services are not a big part of the current surge as only 42% of the 2019>24 increase happened from 21>24.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. January 24 prices surged, +5.6% from December and were +4.8% vs last year, a big change from +0.7% last month, but well below the 8.0% back in March. Now, 77% of their total 2019>24 inflation has occurred since 2021. Last month it was only 49%.
• Haircuts/Other Personal Services – Prices are +0.7% from December and +4.2% from 23, after 2 consecutive months below 4.0%. Inflation has been rather consistent as 59% of the inflation from 19>23 happened in 60% of the time.
• Total Pet– Petflation is 56% lower than the 22>23 rate, but still 1.5 times the U.S. CPI. For January, +4.7% is the 4th highest rate since 1997 (2023: 10.6%; 2009: 10.3%; 2008: 5.2%). Vs December, prices fell -0.1% for Pet Food & Veterinary Services but grew strongly in Non-Vet Services, +5.6% and Supplies, +0.7% so Total Pet was +0.4%. A Dec>Jan price increase has happened 9 straight times and in 25 of the last 27 years with an average lift of 0.4%. In terms of Petflation, 2024 started just as we should have expected. Veterinary & Food are still the Petflation leaders, but all segments have an influence. Pet Food has largely been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Petflation is slowing, but it is still strong, with the 4^th highest rate for January and 2023 had the 2^nd highest annual rate in history. It is also 1.5 times the National CPI. In 2021 it was only 75% of that rate. Even if it slows to 0%, you can’t ignore the fact that inflation is cumulative. Pet prices are 20.9% above 2021 and 26.1% higher than 2019. Those are big lifts. Since price/value is the biggest driver in consumer spending it is likely to affect the Pet Industry. The Non-Vet Services segment will be the least impacted as it is the most driven by high income CUs. Supplies and Veterinary will likely see a reduction in purchase frequency. Food is the most needed segment so the response will be complex. It could include a movement to online shopping, switching to private label or even downgrading the quality of food.

In fact, one impact of high cumulative inflation will be very visible soon at the industry’s preeminent trade show, Global Pet Expo 2024. There are over 1100 exhibitors with 120+ actively soliciting OEM (Private Label) customers. Because many have expertise in OEM this private label trend has caused a record surge in Foreign Exhibitors, 36% of all booths including 250 from China. Inflation has further enhanced  the importance of “Value” to consumers.