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) are larger than Gibbons has seen in decades; however, Gibbons notes that it is slowing. April prices grew 0.5 percent from March and the CPI was still up +4.9 percent vs. 2022, but down slightly from +5.0 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 +7.1 percent, with two consecutive months below 10 percent. 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 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 and is now +10.4 percent in April, more than double the national rate of 4.9 percent. Gibbons has looked 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>22, 2020>21, 2019>20, 2018>19)
- 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 comparisons
- 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 April 2021 to April 2023. He is using 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 offer a visual image of the flow of pricing. The similarities and differences in patterns are evident between segments and can be compared to the overall U.S. CPI. The current numbers, plus yearend and those from 12 and 24 months earlier, are included. This will allow some key waypoints. In April, prices are up from March for all segments and all but Supplies are at their cumulative inflation peak.
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In March 2021, the national CPI was only +3.9 percent and pet prices were +1.9 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 small October dip in Veterinary. In November>December, Services and Food prices continued to grow while Veterinary and Supplies prices stabilized. In January>April, prices in all but Supplies grew every month. Cumulative total Petflation from December 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 Jan>Apr but 38 percent of the overall 18.1 percent increase in the 40 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 December 2021, and it has continued, with 93 percent of the 22.3 percent increase occurring 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 August>October setting a new record. Prices stabilized in November>December but turned up in January>February, setting a new record. In March, they fell -0.3 percent, but are up +0.3 percent in April.
- 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 Mar>June. It turned up again July>March but the increase slowed to +0.1 percent in April. Services remains in third place among pet industry segments.
- 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 and set new records in January>April.
- 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 Jul>Nov. It slowed in December but has turned up again January>April. Except for a dip by Supplies in March, prices in all segments increased every month in 2023. It has been ahead of the cumulative U.S. CPI on our 2019>23 chart since November 2022.
Next, Gibbons examines the YOY inflation rate change for April and compare it to last month, last year and to previous years. He will also show total inflation from 2021>23 and 2019>23. Petflation increased to 10.4 percent in April and is now more than double the National rate. The chart will compare the inflation rates of 2022>23 to 2021>22 and other years but also see 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.
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Overall, Prices were +0.5 percent vs. March and were up 4.9 percent vs. April 2022. The Grocery increase is down again, to +7.1 percent from +8.4 percent , but is still a big negative. Inflation usually continues in April so it’s not surprising that eight of nine categories had increased prices from last month, compared to six in March. Three of the eight increases were 1.0+ percent, all from the pet industry – Total Pet: 1.8 percent; Pet Food: 1.4 percent; Veterinary: 3.2 percent. The overall national YOY monthly inflation rate for April is down from March and is again much lower than the 21>22 rate. Three categories – Pet Supplies, Medical Services and Food at home have a similar pattern. In all other categories the 22>23 inflation rate is higher than the 2021>22 rate and is in fact the highest rate in any year since 2019 for all but Haircuts/Services. In our 2021>2023 measurement you also can see that over 70% 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. Gibbons notes these are all service expenditures, not products. The Pet Supplies Segment has a unique situation. The 2021>23 inflation surge provided 110 percent of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 2020>21.
- U.S. CPI– Prices are +0.5 percent from March. The YOY increase is down to +4.9 percent. It peaked at +9.1 percent back in June. The targeted inflation rate is <2 percent so we are still over two times higher than the target. However, a 10th straight slight decline is good news. It is also good that the current inflation rate is below 2021>22 but the 2021>23 rate is 13.6 percent, and it’s 73 percent of total inflation since 2019. Gibbons wonders how many households “broke even” by increasing their income by 14 percent in two years.
- Pet Food– Prices are +1.4 percent vs March and 14.6 percent vs. April 2022. They are also more than double the Food at Home inflation rate –Gibbons says this is not good news. The YOY increase is being measured against a time when prices were 6.9 percent above the 2019 level, but that increase is still an incredible 6.6 times the pre-pandemic 2.2 percent increase from 2018 to 2019. The 2021>2023 inflation surge generated 95 percent of the total 24.0 percent inflation since 2019.
- Food at Home – Prices are up +0.1 percent from March. The monthly YOY increase is 7.1%, down from 8.4 percent in March and considerably lower than July>September 2022 when it exceeded 13 percent. The 25.0 percent inflation for this category since 2019 is 34 percent more than the national CPI and remains second to Veterinary, and 75 percent of the inflation since 2019 occurred from 2021>2023. The pattern now 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 tsunami.
- Pets & Supplies – After a dip in March, prices increased +0.3 percent in April. They still have the lowest increase since 2019 and remain in last 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+% 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 but not quite enough for a new record.
- Veterinary Services – Prices are +3.2 percent from March. They are +10.2 percent from 2022 and are again in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 30.6 percent compared to Food at home at 25.0 percent. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 68 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>21. In April prices fell -0.2 percent from March and were only +0.4 percent vs. 2022, the lowest rate from 2019>23. Medical Services are not a big part of the current surge as only 33 percent of the 2019>23 increase happened from 2021>23.
- Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. April 2023 prices were only up +0.1 percent from March and +6.4 percent vs. 2022, which is down from +8.0 percent last month. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 58 percent of the total since 2019 occurred from 2021>23.
- Haircuts/Other Personal Services – Prices are +0.3 percent from March and +5.3 percent from 2022, the second highest rate since 2019. Inflation had its biggest increase in 2020>21 so just 50 percent of the inflation from 2019>23 happened from 2021>23.
- Total Pet– Petflation is 28 percent higher than the 2021>22 rate, 2.1 times the National CPI and +10.4 percent is the highest April rate in history. Prices increased in all segments vs. March, so Total Pet was up 1.8 percent. This was expected as a March>April increase in Petflation has happened in 24 of the last 26 years. Food is the runaway leader, but the 2022>23 inflation rate for all but Supplies exceeds the 21>22 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, let’s look at the YTD numbers.
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The increase from 2022 to 2023 is the biggest for five of nine categories. The 2022>23 rate for Food at Home is essentially tied with 2021>22. The Total CPI, Pet Supplies and Medical Services are significantly down from 2021>22. The average annual increase since 2019 is 4.4 percent or more for all but Medical Services (3.2 percent) and Pet Supplies (2.7 percent).
- U.S. CPI – The current increase is down 30 percent from 2021>22 but is still 27 percent more than the average increase from 2019>2023, and almost three times the average annual increase from 2018>2021, with 75 percent of the 18.8 percent inflation since 2019 occurring from 2021>23. Inflation is a big problem that started recently.
- Pet Food – Strong inflation continues with the highest 2022>23 and 2021>23 rates on the chart. Deflation in the first half of 2021 kept YTD prices low then prices surged in 2022. 91.9 percent of the inflation since 2019 occurred from 2021>23.
- Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 64 percent. Gibbons notes the impact of supply chain issues on the Grocery category as 78 percent of the inflation since 2019 occurred from 2021>23.
- Pets & Pet Supplies – While the inflation rate is down slightly at about 5.4 percent, prices are again near February’s record high. 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>23. 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 +6.2 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 33.3 percent below the pre-pandemic 2018>19 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 Sep>April. The January increase of 8.4 percent was the largest in history. YTD April has slipped a little to 7.6 percent. Growing demand with decreased availability is 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 22, prices turned up again. The YTD rate is 10 percent below the 2020>21 peak but is 68 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 Nov, rose in Dec>Feb, fell in Mar then rose again in Apr. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs. 2022 of 10.3 percent, and it’s 83.9 percent more than the national rate. In April 2022, it was 20.8 percent less than the CPI.
According to Gibbons, Petflation is getting stronger. He puts the numbers into perspective. Petflation grew from 9.4 percent in March to 10.4 percent in April. This is below the record 12.0 percent set in November, but it is a record for the month. More bad news is that eight of the last nine months have been over 10 percent. As Gibbons points out, Petflation is back in double digits. The current rate is 6.5 times more than the 1.6 percent average rate from 2010>2021. There is no doubt that the current pricing tsunami is a significant event in the history of the pet industry, but it will be interesting to see how it affects pet parents’ spending. In Gibbons’ demographic analysis of the annual Consumer Expenditure Survey, which is conducted by the U.S. BLS 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.
Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 10.4 percent from 2022, but they are up 19.3 percent from 2021 and 23.8 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 says it would help to have a little relief in the form of stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before, and Gibbons is hoping for a repeat.