October Update: Petflation Drops to +5.2% vs 2022, Remains Above National CPI
October Update: Petflation Drops to +5.2% vs 2022, Remains Above National CPI
By: Pet Age Staff//November 20, 2023//
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While inflation is slowing, it is still a concern. According to John Gibbons, the Pet Business Professor, 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 and August 2023. In October prices dropped 0.04 percent from September and the CPI fell to +3.2 percent from +3.7 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 +2.1 percent, making it eight consecutive months below 10 percent. As Gibbons states, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so he will continue 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 5.2 percent in October, it is still 62.5 percent above the national rate of 3.2 percent. Gibbons 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 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.
YTD numbers for the monthly comparisons No. 2>No. 4 above.
In our first graph we will track the monthly change in prices for the 24 months from October 2021 to October 2023. 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 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. Gibbons also added and highlighted (pink) the cumulative price peak for each segment. In October, pet prices were up from last month overall and in all segments but Non-Vet Services.
In October 21, the CPI was +7.6 percent and pet prices were +3.4 percent. Like the CPI, prices in the Services segments generally inflated after mid-2020, while product inflation stayed low until late 21. 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>Dececember, Services and Food prices continued to grow while Vet and Supplies prices stabilized. In January>April 23, 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. 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 continued to grow until flattening out in July>December 2022. Prices turned up January>September, then they dipped in October, but 35 percent of the 19.7 percent increase in the 46 months since December 2019 have 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/October, with 93 percent of the 23.1 percent increase having occurred 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 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 February>May, grew in June before flattening in July, then they turned up in August>October, setting a new record. Prices stabilized in November>December but turned up in January>February 2023, a new record. They fell in March, peaked at a new record high in May, fell in June>August, then grew in September>October.
Pet Services– Normally, inflation is 2+ percent. Gibbons theorizes that 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>April. 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, but they turned up again, peaking in August, then they fell in September>October.
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 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 22. In 2023, prices grew January>May, stabilized June>July, then they fell in August and grew September>October to a new high.
Total Pet – Petflation is a sum of the segments. In December 2021, the pricing surge began. In March>June 2022, the segments had their ups and downs, but Petflation grew again from July>November. It slowed in December, turned up January>May 2023, fell in June>August, then grew in September>October. Except for five monthly dips, prices in all segments increased monthly January>June 2023. In July>August there five more dips but only two in September>October. Cumulative Petflation has been above the CPI since November 2022.
Next, Gibbons turns his attention to the YOY inflation rate change for October and compare it to last month, last year and to previous years. This will also show total inflation from 2021>2023 and 2019>2023. Petflation fell again to 5.2 percent in October, but it is still over 1.6 times the national rate. The chart will allow the comparison of the inflation rates of 2022>2023 to 2021>2022 and other years, but it also will reveal 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 -0.04 percent from September but were +3.2 percent vs. October 2022, down from +3.7 percent last month. Grocery inflation is down again, to +2.1 percent from +2.4 percent. Only two of nine categories had a price decrease from last month – Pet Services and the national CPI. There was only one in September, but four in August. That’s two consecutive monthly decreases for Pet Services. The national YOY monthly CPI rate is down to 3.2 percent from 3.7 percent in August>September and is only 42 percent of the 2021>2022 rate. The 2022>2023 inflation rate is below 2021>2022 for all categories for the second consecutive month. In his 2021>2023 measurement, Gibbons has shown 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-related segments). Gibbons note 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. Gibbons says that pet products have a very different pattern. The 2021>2023 inflation surge provided 94.8 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 -0.04 percent from September. The YOY increase is 3.2 percent, down from 3.7 percent. It peaked at +9.1 percent back in June 2022. The targeted inflation rate is <2 percent so Gibbons states this is still 85 percent higher than the target. After 12 straight declines, there were two lifts, then a stable month and now another drop, which Gibbons describes as good news. The current inflation rate is 58.4 percent below 2021>2022 but the 2021>2023 rate is still 11.2 percent. That is 57 percent of the total inflation since 2019, but it is now below 60 percent.
Pet Food– Prices are +0.1 percent vs. September and +6.5 percent vs. October 2022, down from 7.6 percent. However, they are still 3.1 times the Food at Home inflation rate. The YOY increase of 6.5 percent is being measured against a time when prices were 15.4 percent above the 2019 level, but that increase is still 1.8 times the pre-pandemic 3.7 percent increase from 2018 to 2019. The 2021>2023 inflation surge has generated 98.3 percent of the total 22.9 percent inflation since 2019.
Food at Home – Prices are up +0.3 percent from September. The monthly YOY increase is 2.1 percent, down from 2.4 percent in September and radically lower than July>September 2022, when it exceeded 13 percent. The 25.8 percent inflation for this category since 2019 is 32 percent more than the national CPI and remains second to Veterinary, with 57 percent of the inflation since 2019 occurring from 2021>2023. The pattern mirrors the national CPI, but Gibbons notes 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 tidal wave.
Pets & Supplies– Prices were up +0.1 percent from September but down -1.2 percent vs. October 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 92 percent of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. Three straight 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, then turned up in September>October.
Veterinary Services – Prices are up +0.4 percent from September. They are +8.1 percent from 2022, and Veterinary Services took the No 1 spot from Food in the pet industry. Plus, they are still the leader in the increase since 2019 with 29.1% compared to Food at home at 25.8 percent. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 69% of the 4 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 0.2% from September but are -2.0 percent vs. 2022. Prices have now deflated for six straight months. Medical Services are not a big part of the current surge as only 38 percent of the 2019>2023 increase happened from 2021>2023.
Pet Services – Inflation slowed in 2020 but began to grow in 2021. October 2023 prices were -0.4 percent from September but +4.7 percent vs. 2022, which is down from 6.0 percent last month and much lower than 8.0 percent in March. Now, only 55 percent of their total 20.6 percent inflation since 2019 occurred from 2021>2023.
Haircuts/Other Personal Services – Prices are up 0.4 percent from September and +5.0 percent from 2022, up slightly from 4.8 percent last month. Inflation has been rather consistent as 50 percent of the inflation from 2019>2023 happened from 2021>2023.
Total Pet– Petflation is now 55% lower than the 21>22 rate, but still 1.6 times the National CPI. For October, +5.2 percent is the fourth highest rate since 1997 (2022: 11.6 percent; 2008: 9.7 percent; 2007: 5.5 percent). Compared to September, prices again grew for all but Services, so Total Pet was +0.2 percent. A September>October increase has happened in 17 of the last 24 years, so it was not a surprise. Veterinary and Food are still the Petflation leaders; however, 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.
The increase from 2022 to 2023 is the biggest for four of nine categories – All Pet. The 2022>2023 rate for Haircuts is slightly below 2021>2022. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 2021>2022. The average annual increase since 2019 is 4.5 percent or more for all but Medical Services (2.8 percent) and Pet Supplies (2.5 percent).
U.S. CPI – The current increase is down 48 percent from 2021>2022 and 4.4 percent less than the average increase from 2019>2023, but it’s 65 percent more than the average annual increase from 2018>2021, while 68 percent of the 19.1 percent inflation since 2019 occurred from 2021>23. 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. In addition, 96 percent of the inflation since 2019 occurred from 2021>2023.
Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 35 percent. Gibbons notes that the impact of supply chain issues can be seen on the Grocery category as 70 percent of the inflation since 2019 occurred from 2021>23.
Pets & Pet Supplies – Although prices rose in October, the YTD inflation rate is down to 3.3 percent. Prices deflated significantly in both 2020 and 2021 which helped to create a very unique situation. Prices are up 10.4 percent from 2019 but 106 percent of this increase happened from 2021>2023. Prices are up 11.0 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 +6.4 percent, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, inflation has consistently increased since 2019. 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 been deflating and are now at -0.3 percent YTD, which represents 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 2023. The January 2023 increase of 8.4 percent set a new record. YTD October fell a little from 6.8 percent to 6.6 percent. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
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, 93 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 different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved 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 Jun>Aug 23. Supplies prices stabilized Apr>May, grew June>October, fell in November, rose in December>February, fell again in March, rose in April>May, then it fell in June>August. Both turned up in September and October. The Services segments have also had ups and downs, but they have generally inflated. The net is a YTD Petflation rate vs. 2022 of 8.7 percent, double the National 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 5.7 percent in September to 5.2 percent in October. This is 57 percent below the record or 12.0 percent that was set in November, but still the fourth highest rate for the month. The last five months have all been <10 percent but 9 of 15 have been 10+ percent. The current 5.2 percent rate is still 3.3 times the 1.6 percent average rate from 2010>2021 and also is 1.6 times the national rate.
Gibbons believes there is no doubt 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 parents’ spending. In Gibbons’ demographic analysis of the annual Consumer Expenditure Survey, which is conducted by the US BLS with help from the Census Bureau, he 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 and, as Gibbons has found, 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.
As Gibbons sees it, this spending behavior of pet parents suggests that he should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 5.2 percent from 2022, but they are up 17.4% from 2021 and 22.0% 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 it has happened before in Products. The Pet Food inflation rate has slowed for six straight months, and Pet Supplies prices have deflated vs. 2022 in two of the last three months, including a -1.2 percent drop in October. As Gibbons note, this is just a start, and he hopes that it accelerates down.
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