Pet Age Staff
Although inflation is no longer a major headline, it is still news, especially for the pet industry. John Gibbons, the Pet Business Professor and president of A GPS for Pet Businesses, has been reporting on inflation and its impact on the pet industry. The year-over-year (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 percent from April and the CPI was still up +4.0 percent vs. 2022, but down from +4.9 percent 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 percent, with three consecutive months below 10 percent. Minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so Gibbons continues to release monthly reports to track Petflation as it evolves in the market.
Total Petflation was +4.1 percent in December 2021 while the overall CPI was +7.0 percent. The gap narrowed as Petflation accelerated and reached 96.7 percent 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 percent in May, more than 2½ times the national rate of 4.0 percent. As Gibbons looks 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 2023 vs. 2022, which will include pet segments and relevant human spending categories. Plus:
- CPI change from the previous month.
- Inflation changes for recent years (2021>2022, 2020>2021, 2019>2020, 2018>2019).
- Total Inflation for the current month in 2023 vs. 2019 and now vs. 2021 to see the full inflation surge.
- Average annual YOY inflation rate from 2019 to 2023
- Year to date (YTD) comparisons
- YTD numbers for the monthly comparisons No. 2>No. 4 above.
In the first graph, Gibbons will track the monthly change in prices for the 24 months from May 2021 to May 2023. He uses December 2019 as a base number to track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to offer a visual image of the flow of pricing. It shows 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 percent and pet prices were +2.2 percent. 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. In November>December, Services and Food prices continued to grow while Veterinary and Supplies prices stabilized. In January>May, Food prices grew every month. Prices in the other segments also grew except for one monthly dip for each. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since November.
- U.S. CPI – The inflation rate was below 2 percent through 2020. It turned up in January 2021 and continued to grow until flattening out in July>December 2022. Prices turned up again in January>May but 38 percent of the overall 18.3 percent increase in the 41 months since December 2019 happened in the six months from January>June 2022.
- Pet Food – Prices stayed generally below December 2019 levels from April 2020>September 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued – 93 percent of the 23.3 percent 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 February>May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in November>December but turned up in January>February, setting a new record. In March, they fell but they set a new record in May.
- Pet Services– Normally inflation is 2+ percent. 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 percent in April and prices fell -0.3 percent in May. Services still have the third 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 October and December 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 March>June 2022 the segments had ups and downs, but Petflation grew again from July>November. It slowed in December but has turned up again January>May. Except for three 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>2023 chart since November 2022.
Next, Gibbons turns his attention to the YOY inflation rate change for May and compare it to last month, last year and to previous years. We will also show total inflation from 2021>2023 and 2019>2023. Petflation slowed slightly to 10.3 percent in May but is now 2½ times the national rate. The chart will compare the inflation rates of 2022>2023 to 2021>2022 and other years but also reveals how much of the total inflation since 2019 came from the current pricing surge. Again, Gibbons has included some human categories to put the pet numbers into perspective.
Overall, Prices were +0.3 percent vs April and were up 4.0 percent vs May 2022. The Grocery increase is down again, to +5.8 percent from +7.1 percent, but is still a big negative. Inflation often slows in May so it’s not surprising that three of nine categories had decreased prices from last month, compared to one in April. Of the six categories with increases, only two were over 0.3 percent, both from the Pet Industry – Supplies: 0.9 percent; Pet Food: 0.8 percent. The overall national YOY monthly inflation rate for May is down from April and is again much lower than the 2021>2022 rate. All but three categories (Pet Food, Veterinary and Total Pet) have a similar pattern. In these three the 2022>2023 inflation rate is higher than the 2021>2022 rate and is in fact the highest rate in any year since 2019. In the 2021>2023 measurement provided by Gibbons, it is revealed that over 70 percent 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 2021>2023 inflation surge provided 116 percent of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 2020>2021.)
- U.S. CPI– Prices are +0.3 percent from April. The YOY increase is down to +4.0 percent. It peaked at +9.1 percent back in June 2022. The targeted inflation rate is <2 percent so we are still two times higher than the target. However, an eleventh straight decline is good news. It is also good that the current inflation rate is below 2021>2022 but the 2021>2023 rate is still 13.0 percent, 69 percent of total inflation since 2019. How many households “broke even” by increasing their income by 13 percent in two years?
- Pet Food– Prices are +0.8 percent vs. April and 13.8 percent vs. May 2022. They are also more than double the Food at Home inflation rate – this is not good news. The YOY increase of 13.8 percent is being measured against a time when prices were 8.4 percent above the 2019 level, but that increase is still an incredible 4.9 times the pre-pandemic 2.8 percent increase from 2018 to 2019. The 2021>2023 inflation surge generated 99 percent of the total 24.3 percent inflation since 2019.
- Food at Home – Prices are up +0.1 percent from April. The monthly YOY increase is 5.8 percent, down from 7.1 percent in April and considerably lower than Jul>Sep 2022 when it exceeded 13 percent. The 24.9 percent inflation for this category since 2019 is 32 percent more than the national CPI and remains second to Veterinary, and 74 percent 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 percent from April, but they still have the lowest increase since 2019. However, they did move up to third 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+ percent of the total price increase since 2019. They reached an all-time high in October then prices deflated. Three straight months of increases pushed them to a new record high in February. but prices fell in March. They bounced back in April>May and set a new record.
- Veterinary Services – Prices are -0.2 percent from April. They are +11.0 percent 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 percent compared to Food at home at 24.9 percent. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64 percent of the four years worth of inflation occurred in the two 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 2020>2021. In May, prices fell -0.1 percent from April and are -0.1 percent vs. 2022, the only 2022>2023 deflation in any category. Medical Services are not a big part of the current surge as only 33 percent of the 2019>23 increase happened from 2021>2023.
- Pet Services – Inflation slowed in 2020, but it began to grow in 2021/2022. May 2023 prices were down -0.3 percent from April and +5.6 percent vs. 2022, which is down from 6.4 percent last month and 8.0 percent in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 62 percent of the total since 2019 occurred from 2021>2023.
- Haircuts/Other Personal Services – Prices are +0.2 percent from April and +4.9 percent from 2022, only the third highest rate since 2019. Inflation had a significant surge in 2020>2021 so just 54 percent of the inflation from 19>23 happened from 2021>2023.
- Total Pet– Petflation is 27 percent higher than the 2021>2022 rate, 2.5 times the National CPI and +10.3 percent is the highest May rate in history. Versus April, product prices increased while Services fell so Total Pet was only up 0.3 percent. Note: An April>May increase has happened in 21 of the last 26 years. Food and Veterinary are the leaders and are the only segments in which the 2022>2023 inflation rate exceeds the 2021>2022 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, Gibbons takes a look at the YTD numbers.
The increase from 2022 to 2023 is the biggest for four of nine categories – All Pet. The 2022>2023 rate for Haircuts is essentially tied with 2021>2022. The Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 2021>2022. The average annual increase since 2019 is 4.4 percent or more for all but Medical Services (3.1 percent) and Pet Supplies (2.7 percent).
- U.S. CPI – The current increase is down 35 percent from 2021>2022 but is still 20 percent more than the average increase from 2019>2023, and over 2½ times the average annual increase from 2018>2021. And 74 percent of the 18.8 percent inflation since 2019 occurred from 2021>2023. Inflation is a big problem that started recently.
- Pet Food – Strong inflation continues with the highest 2022>2023 and 2021>2023 rates on the chart. Deflation in the first half of 2021 kept YTD prices low then prices surged in 2022. And 93.3 percent of the inflation since 2019 occurred from 2021>2023.
- Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 60 percent%. You can see the impact of supply chain issues on the Grocery category as 77 percent of the inflation since 2019 occurred from 2021>23.
- Pets & Pet Supplies – The inflation rate is up slightly at 5.5 percent 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 percent from 2019 but 113 percent of this increase happened from 2021>2023. Prices are up 12.8 percent from their 2021 “bottom.”
- Veterinary Services – They held onto the top spot in inflation since 2019 but they are only the fourth highest since 2021. At +6.3 percent, 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 percent below the pre-pandemic 2018>2019 rate.
- Pet Services – May 2022 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 September>April. The January increase of 8.4 percent was the largest in history. YTD May has slipped a little to 7.2 percent. 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 percent below the 2020>2021 peak but is 76 percent more than 2018>19. Consumers are paying 20 percent 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 April>May, grew June>October, fell in November, rose in December>February, fell in March then rose again in April>May. The Services segments have had ups and downs but are generally inflating. The net is a YTD Petflation rate vs. 2022 of 10.3 percent, 94.3 percent more than the National rate. In May 2022, it was 5.8 percent less than the CPI.
According to Gibbons, Petflation is still strong. He puts the numbers into perspective. Petflation slowed from 10.4 percent in April to 10.3 percent in May. This is below the record 12.0 percent set in November, but it is a record for the month. More bad news is that nine of the last 10 months have been over 10 percent. We are back in double digits. The current rate is 6.4 times more than the 1.6 percent average rate from 2010>2021. Gibbons believes that the current pricing tsunami is a significant event in the history of the pet industry, but he is unsure if it will affect pet parent spending. In his demographic analysis of the annual Consumer Expenditure Survey, which is conducted by the U.S. Bureau of Labor Statistics with help from the Census Bureau, Gibbons has 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 percent from 2022 but they are up 19.3 percent from 2021 and 23.6 percent from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on pet parents to prioritize their expenditures. Gibbons has seen that the needs of pet children are always a high priority, but he hopes for a little relief – stabilized prices and even deflation. This is not likely in the Service segments, but it is definitely possible in products. It’s happened before, and Gibbons is hoping for a repeat.
This article originally appeared on Pet Age: Petflation May 2023: Pet Prices Remain High, Up 10.3% vs 2022Leave a reply