As has been the case throughout 2022, inflation continues to make headlines. There have been year-over-year (YOY) increases in the monthly Consumer Price Index (CPI) larger than we have seen in decades. According to John Gibbons, the Pet Business Professor and president of A GPS for Pet Businesses, October prices rose 0.4 percent from September, and the CPI was still up +7.7 percent vs 2021, but down from +8.2 percent last month. The grocery price surge slowed a little but they’re still up 12.4 percent over 2021. That’s eight straight months of double-digit YOY monthly percentage increases. These are the first 10+ percent increases since 1981. 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 Pet prices were 4.1 percent higher in December 2021 than in December 2020, while the overall CPI was up 7.0 percent. The gap narrowed as Petflation accelerated and reached 96.7 percent of the national rate in June. National inflation has slowed since July, but Petflation has increased, passing the national rate in July and is +11.6 percent in October, 50.6 percent higher than the national rate of 7.7 percent. We need to look a little 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 2022 vs. 2021, which will include pet segments and relevant human spending categories. Plus”
- CPI change from the previous month
- Inflation changes for recent years (2020>2021, 2019>2020, 2018>2019)
- Total Inflation for the current month in 2022 vs. 2019
- Average annual YOY inflation rate from 2019 to 2022
- Year-to-date (YTD) comparisons
- 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 2020 to October 2022. 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 those from 12 and 24 months earlier are included as are the year-end numbers for 2020 and 2021.This will give you some key waypoints for comparisons.
(Note: Some key peaks and valleys are also highlighted.)
The pandemic hit home in 2020. In October, the national CPI was only +1.3 percent and pet prices were down -0.4 percent. There are two different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. 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, when all increased. In August>October, Petflation accelerated, except for a miniscule dip in Veterinary last month.
- 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/Aug 2022. 43 percent of the overall 16.0 percent increase since 2019 happened from January>June 2022.
- Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 90 percent of the 15.6 percent increase has happened since January.
- 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 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February> May but turned up in June. The CPI flattened in July but turned up in August>October.
- 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>April. Inflation was stronger in 2022 but it got on a rollercoaster in March>June. It has turned up again July>October.
- Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December, which put them above the overall CPI. In May, prices fell and stabilized in June. Prices turned up again and despite an October dip they have been above the national CPI since July.
- Total Pet – The blending of the different segment patterns made Total Pet appear calm. In December 2021 prices surged in all. The segments had mixed up and downs March>June but total Petflation has accelerated since July.
Next, we’ll turn our attention to the YOY inflation rate change for October and compare it to last month, last year and to previous years. We’ve added some human categories to put the pet numbers into perspective.
Overall, prices were up 0.4 percent vs. September but were up 7.7 percent vs October 2021. The Grocery increase is down to 12.4 percent, which is still a big negative but there is another area of concern. Only two of nine categories had increases over 1 percent from last month, but both are Pet. The national CPI rate is slowing but Petflation, especially in Food and Supplies, is getting worse.
- U.S. CPI– Prices are up 0.4 percent from August. The YOY increase is +7.7 percent, down from the 9.1 percent peak in June. The targeted inflation rate is <2 percent so we are still four times higher than the target. However, a fourth slight decline is good news.
- Pet Food– Prices are +1.0 percent vs. September and 15.0 percent vs. October 2021. They are now 21 percent higher than the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were essentially at 2019 levels, but that increase is still over percent times the pre-pandemic 3.7 percent increase from 2018 to 2019.
- Food at Home – Prices are up 0.5 percent from September. The increase from 2021 is 12.4 percent, down slightly from 13.0 percent last month. Inflation for this category since 2019 is the highest on the chart and is 46 percent more than the national CPI.
- Pets & Supplies – Prices grew 1.4 percent from September, the biggest increase of any segment. However, they stayed in third place in terms of monthly increase over 2021 for pet segments and still have the lowest increase since 2019.
- Veterinary Services – October prices fell -0.03 percent from September. They are +11.1 percent from 2021 and trail only Food in the pet industry. They also remain 2nd in the increase since 2019 with 19.5 percent compared to Food at Home at 23.1 percent.
- Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a low rate in 2021. In October prices dipped but 2022 prices are still 6 percent above the pre-pandemic 2018>2019 rate.
- Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. October prices are +0.7 percent from September and +6.3 percent vs. 2021, reaching another new record high.
- Haircuts & Other Personal Services – Prices are +0.2 percent from September and +5.6 percent from 2021. They are +15.8 percent since 2019.
- Total Pet– Petflation is strong, three times the rate of last year and is 50.6 percent ahead of the national CPI. All but Veterinary increased prices in October, but inflation is still primarily being driven by Food and Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super premium food has been generally immune as consumers are used to paying a lot and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.
Now here’s a look at Year-to-Date (YTD) numbers. How does 2022 compare to previous years?
The increase from 2021 to 2022 is the biggest for seven of nine categories. The average annual increase since 2019 is 3.8 percent or more for all but Pet Food and Pet Supplies. This is largely due to deflation in the first half of 2021.
- U.S. CPI – The current increase is still almost double the average increase from 2019>2022, but about four times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
- Pet Food – Inflation is growing stronger, especially after deflation in the first half of 2021 kept YTD prices low.
- Food at Home – The 2022 YTD inflation beat the U.S. CPI by 36 percent. You can see the impact of supply chain issues.
- Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a flat 2021, it is significant and just slightly behind Food and Veterinary in the pet industry.
- Veterinary Services – Trails only Food at Home in inflation since 2019 and is the only segment on the chart with a 3+ percent inflation rate each year 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 2022 there is another pricing surge as the inflation rate is 34 percent higher than pre-pandemic 2018>2019.
- Pet Services – February and May set records for the biggest year over year monthly increases in history. Prices began to grow again in July, reaching record highs in September & October. The October YTD increase of 6.1 percent is the largest in history. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
- Haircuts & Personal Services – The services segments, essential and non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate is even with 2020>21 but still 93 percent more than 2018>2019. Consumers are paying 15 percent more than in 2019. This usually reduces the purchase frequency.
- Total Pet – We have seen basically 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 generally 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 we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in Jun>Oct. The Services segments have had ups and downs, but both are generally inflating. The net was an October YTD Petflation increase vs 2021 of 8.4 percent, surpassing the high 8.3 percent national rate. In March, it was only 72.5 percent of the CPI.
Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 8.4 percent current YTD increase in Total Pet is still below the 8.9 percent record set in 2009 but five-plus times more than the 1.5 percent average since then. Pet spending continues to move to higher income groups, but the impact of inflation varies by segment. Supplies is the most affected as many categories are 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 reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.