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November Petflation Report: Consumer Pet Spending Drops to +4.3% vs 2022

By Pet Age Staff//December 18, 2023//

November Petflation Report: Consumer Pet Spending Drops to +4.3% vs 2022

By: Pet Age Staff//December 18, 2023//

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Inflation continues to slow but, according to the Pet Business Professor John Gibbons, it is still far above the target rate. The huge year-over-year (YOY) increases in the monthly Consumer Price Index (CPI) peaked in June 2022 at 9.1 percent then began to slow until turning up in July/August 2023. Prices dropped in October and November, and the November CPI  fell to +3.1 percent from +3.2 percent vs. 2022. Grocery inflation also continued to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +1.7 percent, which also is nine consecutive months below 10 percent. As Gibbons has learned, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so he continues to publish monthly reports to track Petflation as it evolves in the market.

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 considerably since June 2022, but Petflation generally increased until June 2023. It passed the national CPI in July 2022 and, at 4.3 percent in November, it is still 38.7 percent above the national rate of 3.1 percent. Gibbons dives deeper into the numbers as 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 that will include pet segments and relevant human spending categories. Plus:
    1. CPI change from the previous month.
    2. Inflation changes for recent years (2021>2022, 2020>2021, 2019>2020, 2018>2019).
    3. Total Inflation for the current month in 2023 vs. 2019 and now vs. 2021 to see the full inflation surge.
    4. Average annual YOY inflation rate from 2019 to 2023
  • Year-to-date (YTD) comparisons.
    1. YTD numbers for the monthly comparisons No. 2>4 above.

In the first graph, Gibbons tracks the monthly change in prices for the 24 months from November 2021 to November 2023. He uses December 2019 as a base number to track the progress from pre-pandemic times through an eventual recovery. This chart is designed to offer a visual image of the flow of pricing. This reveals the similarities and differences in segment patterns, and they can be compared to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. Gibbons has also included and highlighted (pink) the cumulative price peak for each segment. In November, pet prices were down from last month overall and in all segments but food and vet services.

(click to enlarge)

In November 2021, the CPI was +8.2 percent and pet prices were +3.5 percent. Like the CPI, prices in the Services segments generally inflated after mid-2020, while product inflation stayed low until late 2021. In 2022, Petflation took off. Food prices grew consistently, but the other segments had mixed patterns until July 2022, when all increased. In August>October, Petflation took off. In November>December, services and food prices continued to grow while vet and supplies prices stabilized. In January>April 2023, prices grew every month except for one dip by supplies. In May, products prices grew while services slowed. In June/July, this was reversed. In August, all but services fell. In September/October, this was reversed. In November, all but food and veterinary services fell, which drove total pet prices down, -0.2 percent vs. October. Petflation has been above the CPI since November 2022.

  • U.S. CPI – The inflation rate was below 2 percent through 2020. It turned up in January 2021, and it continued to grow until flattening out in Jul>Dec 22. Prices turned up January>September, then dipped in October/November, but 35 percent of the 19.5 percent increase in the 47 months since December 2019 happened in the six months from January>June 2022 – 13 percent of the time.
  • Pet Food – Prices were at or below December 2019 levels from April 2020>September 2021. They turned up and grew, peaking in May 2023. In June>August, prices dipped but grew again in September>November, with 93 percent of the 23.2 percent increase occurring since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 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 February>May, grew in June, flattened in July, then turned up in August>October, setting a new record. Prices stabilized in November>December but turned up in January>February 23, a new record. They fell in March, peaked at a new record in May, fell in June>August, grew in September>October, then fell in November.
  • 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 January>Aprst. Inflation was stronger in 2022 but it got on a rollercoaster in March>June. It turned up again July 2022>March 2023 but the increase slowed to +0.1 percent in April. Prices fell -0.3 percent in May, turned up again, peaking in Aug, then fell in September>November.
  • Veterinary – Inflation has been consistent. Prices turned up in March 2020 and grew through 2021. A surge began in December 2021 which put them above the overall CPI. In May 2022, prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 2022. In 2023, prices grew Jan>May, stabilized Jun>Jul, fell in Aug, then grew September>November to a new high.
  • Total Pet – Petflation is a sum of the segments. In December 2021 the price surge began. In Mar>Jun 22 the segments had their ups and downs, but Petflation grew again from July>November. It slowed in December, grew January>May 2023 (peak), fell June>August, grew in September/October, then fell in November. Except for five monthly dips, prices in all segments increased monthly January>June 2023. In July/August, there were five more dips, two in September/October, then two big ones in November. Petflation has been above the CPI since November 2022

Next, Gibbons turns his attention to the Year Over Year inflation rate change for November, and he compares it to last month, last year and to previous years. He will also show total inflation from 2021>2023 and 2019>2023. Petflation fell again to 4.3 percent in November, but it is still almost 1.4 times the National rate. The chart will compare the inflation rates of 2022>2023 to 2021>2022 and other years, but it 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.

(click to enlarge)

Overall, Prices were -0.2 percent from October but were +3.1 percent vs. November 2022, down from +3.2 percent in October. Grocery inflation is down again, to +1.7 percent from +2.1 percent. Five of nine categories had a price decrease from last month – national CPI, total pet, groceries, pet supplies and services. There were only two in October. That’s three months in a row for pet services. The national YOY monthly CPI rate of 3.1 percent is only 44 percent of the 2021>2022 rate. The 2022>2023 inflation rate is below 2021>2022 for all categories for the third consecutive month. In his 2021>2023 measurement, Gibbons points out that over 65 percent of the cumulative inflation since 2019 occurred in only four segments – Total Pet, Pet Food, Pet Supplies and Veterinary (all pet).

Gibbons also notes that the segments with the lowest percentages are Haircuts, Pet Services and Medical Services. Service segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Services expenditures account for 61.8 percent of the national CPI so they are very influential. According to Gibbons, pet products have a very different pattern. The 2021>2023 inflation surge provided 97.8 percent of their overall inflation since 2019. This happened because pet products prices in 2021 were just starting to recover from a deflationary period.

  • U.S. CPI– Prices are -0.2 percent from October. The YOY increase is 3.1 percent, down from 3.2 percent. It peaked at +9.1 percent back in June 2022. The targeted inflation rate is <2 percent so Gibbons points out that we are still 55 percent higher than the target. After 12 straight declines, we had two lifts, then a stable month and now two consecutive drops, which Gibbons calls good news. The current inflation rate is 56.3 percent below 2021>2022 but the 2021>2023 rate is still 10.5 percent. That is 54 percent of the total inflation since 2019, but down from 57 percent last month.
  • Pet Food– Prices are +0.01 percent vs. October and +5.6 percent vs. November 2022, down from 6.5 percent. However, they are still 3.1 times the food at home inflation rate. The YOY increase of 5.6 percent is being measured against a time when prices were 16.3 percent above the 2019 level, but that increase is still 1.5 times the pre-pandemic 3.7 percent increase from 2018 to 2019. The 2021>2023 inflation surge has generated 96.9 percent of the total 22.9 percent inflation since 2019.
  • Food at Home – Prices are down -0.5 percent from October. The monthly YOY increase is 1.7 percent, down from 2.1 percent in October and radically lower than July>September 2022 when it exceeded 13 percent. The 25.4 percent inflation for this category since 2019 is 31 percent more than the national CPI and remains second to veterinary, with 54 percent of the inflation since 2019 occurring 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 were down -0.5 percent from October and -1.2 percent vs. November 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 82 percent of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. Three months of increases pushed them to a new record high in February. Prices fell in March, bounced back in April/May to a new record high, fell in June>August, grew in September>October, then fell in November.
  • Veterinary Services – Prices are up +1.0 percent from October. They also are +9.0 percent from 2022, again the highest rate in the pet industry. Plus, they are still the leader in the increase since 2019 with 30.0 percent compared to food at home at 25.4 percent. For veterinary services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70 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 20>21. Prices grew 0.3 percent from October but are -0.9 percent vs. 2022. Prices have now deflated for seven straight months. Medical Services are not a big part of the current surge as only 39 percent of the 2019>23 increase happened from 2021>2023.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. November 2023 prices were -2.1 percent from October and only +1.4 percent vs. 2022, which is down 70 percent from 4.7 percent last month and 84 percent lower than 8.0 percent in March. Now, only 50 percent of their total 17.8 percent inflation since 2019 occurred from 2021>2023.
  • Haircuts/Other Personal Services – Prices are up 0.3 percent from October and +3.9 percent from 2022, down sharply from 5.0% last month. Inflation has been rather consistent as 51 percent of the inflation from 19>23 happened from 2021>2023.
  • Total Pet– Petflation is now 64 percent lower than the 2021>2022 rate, but still 1.4 times the U.S. CPI. For November, +4.3 percent is the fourth highest rate since 1997 (2022: 12.0 percent; 2008: 10.0 percent; 2007: 5.3 percent). Compared to October, prices fell for Supplies and Services so Total Pet was -0.3 percent. An October>November drop has only happened in six of the last 24 years so it was a surprise. Veterinary and food are still the Petflation leaders, but all segments have an influence. Pet food has been immune to inflation as pet parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Now, Gibbons takes a look at the YTD numbers.

(click to enlarge)

The increase from 2022>2023 is the biggest for two of nine categories – both Pet Food and Veterinary. The 2022>2023 rates for Haircuts, Pet Services and Total Pet are slightly below 2021>2022. However, the CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 2021>2022. The average annual increase since 2019 is 4.5 percent+ for all but Medical Services (2.7 percent) and Pet Supplies (2.5 percent).

  • U.S. CPI – The current increase is down 48 percent from 2021>2022 and 6.7 percent less than the average increase from 2019>2023, but it’s 72 percent more than the average annual increase from 2018>2021 and 66 percent of the 19.2 percent inflation since 2019 has 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 96 percent of the inflation since 2019 has occurred from 2021>2023.
  • Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 29 percent. Gibbons points to this as an example of the impact of supply chain issues on the grocery category as 69 percent of the inflation since 2019 has occurred from 2021>2023.
  • Pets & Pet Supplies – Prices fell in November and the YTD inflation rate is down to 2.9 percent. Prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.2 percent from 2019 but 105 percent of this increase happened from 2021>2023. Prices are up 10.7 percent from their 2021 bottom.
  • Veterinary Services – They are still No. 1 in inflation since 2019 but they have only the second highest rate since 2021. At +6.5 percent, they have the highest average annual inflation rate since 2019. Inflation was high and consistent, around 4 percent from 2019>2021. It took off in 2022. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have generally been deflating and are now at -0.3 percent YTD, the only current deflation in any segment.
  • 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 September>April 23. The January 2023 increase of 8.4 percent set a new record. Prices have dropped September>November and YTD November fell to 6.1 percent from 6.6 percent in October and 7.0 percent in August. Their price surge started in 2021, when inflation jumped to 4.7 percent from 2.5 percent in 2019 and 2020.
  • Haircuts & Personal Services – The services segments, essential and non-essential, were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. Since 2021 inflation has been a consistent 5+ percent, 89 percent higher than 2018>2019. Consumers are paying 21 percent more than in 2019, which usually reduces the purchase frequency.
  • Total Pet – There were two patterns. After 2019, prices in the services segments increased, and the rate grew into 2021. Pet products – Food and Supplies, took 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 grew until June>August 2023. Supplies prices stabilized April>May, grew June>October, fell in Nov, rose in December>February, fell in March, rose in April>May then fell in June>August. Both grew September/October. In November, Food was stable and supplies fell. The Services segments have also had ups & downs but have generally inflated. The net is a YTD Petflation rate vs. 2022 of 8.3 percent, which is approximately double the CPI. In May 2022, it was 5.8 percent below the CPI.

Petflation is slowing, according to Gibbons, but it remains strong. Petflation dropped from 5.2 percent in October to 4.3 percent in November. This is 64 percent below the record 12.0 percent set in November 2022, but it is still the fourth highest rate for the month. The last six months have all been <10 percent but nine of 16 have been 10+ percent. The current 4.3 percent rate is still 2.7 times the 1.6 percent average rate from 2010>2021 and also 1.4 times the national rate. 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.

Gibbon notes that his demographic analysis of the annual Consumer Expenditure Survey, which is conducted by the U.S. BLS with help from the Census Bureau, has shown 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 the most driven by higher incomes, so inflation is less impactful.

This spending behavior of pet parents suggests to Gibbons that he should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 4.3 percent from 2022 but they are up 16.9 percent from 2021 and 21.5 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. The needs of their pet children are always a high priority, but Gibbons is hoping for a little relief – stabilized prices and even deflation. This is not likely in the service segments, but it has happened before in the products category. Pet food inflation has slowed for seven straight months, and supplies prices have deflated in three of the last four months. It’s just a start. Gibbons would like to see it continue to accelerate downward.

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