John Gibbons, the Pet Business Professor and president of A GPS for Pet Businesses, has been tracking inflation and consumer pet spending. The year-over-year (YOY) increases in the monthly Consumer Price Index (CPI) are larger than have seen in decades, but Gibbons has noticed they are slowing a little. November prices fell -0.1 percent from October. The CPI was still up +7.1 percent vs. 2021, but down from +7.7 percent last month. The grocery price surge also slowed but they’re still up 12.0 percent over 2021. That’s nine 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 Gibbons 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 +12.0 percent in November, 69.0 percent higher than the national rate of 7.1 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>21, 19>20, 2018>19)
- Total Inflation for the current month in 2022 vs. 2019
- Average annual Year Over Year inflation rate from 2019 to 2022
- 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 November 2020 to November 2022. Gibbons will use December 2019 as a base number so he can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give a visual image of the flow of pricing, including 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 some key waypoints for comparisons.
The pandemic hit home in 2020. In November, the national CPI was only +1.3 percent and pet prices were +0.1 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, except for a miniscule dip in veterinary in October. In November, services and food prices surged, veterinary stabilized, but supplies fell. However, total Petflation since December 2019 passed the national CPI lift for the first time.
- 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/August 2022. Forty-three percent of the overall 15.9 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 16.6 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. They plateaued from February> May, turned up in June, flattened in July, turned up in August>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>April. Inflation was stronger in 2022, but it got on a rollercoaster in March>June. It has turned up again July>November.
- 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 patterns made total pet appear calm. In December, 2021 prices surged. The segments had mixed up and downs March>June but Petflation has accelerated since July and passed the U.S. CPI in November.
Next, Gibbons will turn his attention to the YOY inflation rate change for November and compare it to last month, last year and to previous years. He has added some human categories to put the pet numbers into perspective.
Overall, Prices were -0.1 percent vs. October but were up 7.1 percent vs. November 2021. The grocery increase is down to 12.0 percent which is still a big negative but there is another area of concern. Six of nine categories had increases from October. Four were over 0.5 percent, three were pet categories. The U.S. CPI rate is slowing but Petflation, especially in food and now services, is getting worse.
- U.S. CPI– Prices are -0.1 percent from October. The YOY increase is +7.1 percent, down from the 9.1 percent peak in June. The targeted inflation rate is <2 percent so we are still about four times higher than the target. However, a fifth slight decline is good news.
- Pet Food– Prices are +0.8 percent vs. October and 15.7 percent vs. November 2021. They are now 31 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 four times the pre-pandemic 3.7 percent increase from 2018 to 2019.
- Food at Home – Prices are down -0.04 percent from October. The increase from 2021 is 12.0 percent, down slightly from 12.4 percent last month. Inflation for this category since 2019 is the highest on the chart and is 49 percent more than the national CPI.
- Pets & Supplies – Prices fell percent-0.4 percent from October, the second biggest decrease overall and the only one in pet. They still have the lowest increase since 2019 but are still the third highest in monthly increase vs. 2021 for pet segments.
- Veterinary Services – November prices rose +0.1 percent from October. They are +11.0 percent from 2021 and trail only food in the pet industry. They also remain second in the increase since 2019 with 19.2 percent compared to food at home at 23.4 percent.
- Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 2021. In November, prices fell again and 2022 prices are now 14 percent below the pre-pandemic 2018>2019 rate.
- Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. November prices spiked, +1.1 percent from October and +7.4 percent vs. 2021, reaching yet another new record high.
- Haircuts & Other Personal Services – Prices are +1.4 percent from October and +6.8 percent from 2021. They are +16.9 percent since 2019.
- Total Pet– Petflation is strong, three to four times the rate of last year and is 69.0 percent ahead of the national CPI. All but supplies increased prices in November, 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 on a daily basis. 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 eight of nine categories. The average annual increase since 2019 is 3 percent to 4 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 nearly 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 41 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 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 prices surged but have now slowed. However, the inflation rate is still 26 percent higher than pre-pandemic 2018>2019.
- Pet Services – May 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>November. The November YTD increase of 6.2 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 & non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate just passed 2020>21 and is 96% more than 2018>19. Consumers are paying over 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 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, then fell in November. The Services segments have had ups and downs but are generally inflating. The net is a November YTD Petflation increase vs. 2021 of 8.8 percent, ahead of the high 8.1 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 8.8 percent current YTD increase in total pet is still below the 8.9 percent record set in 2009 but about six 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.