September 2023 Update: Petflation Drops Again vs 2022, Pet Food Prices Rise

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While inflation is slowing, it is still a concern. 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 September prices grew 0.2 percent from August but the CPI remained stable at +3.7 percent vs. 2022. However, Grocery inflation continued to drop. After 12 straight months of double-digit YOY monthly increases, grocery inflation is down to +2.4 percent, seven consecutive months below 10 percent. As we have learned, 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.

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 5.7 percent in September, it is still 1.5 times the national rate of 3.7 percent. We 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:
  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.
• YTD comparisons.
  1. 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 September 2021 to September 2023. He 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 offer a visual image of the flow of pricing, showing 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. In September, pet prices were up from last month overall and in all segments but Non-Vet Services.

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In September 2021, the CPI was +6.7 percent and pet prices were +3.2 percent. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Products 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 accelerated. In November>December, Services and Food prices continued to grow while Vet and Supplies prices stabilized. In January>April, 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 this pattern 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 21 and continued to grow until flattening out in July>December 2022. Prices turned up again in January>September but 34 percent of the overall 19.8 percent increase in the 45 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 with a sharp lift in December, which continued until the June>August 2023 dip. Prices then grew in September, with 93 percent of the 23.1 percent increase since 2019 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 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 2023, a new record. They fell in March, set a record in May, fell in June>August then grew in September.
• 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 Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in March>June. It turned up again July 22>March 23 but the increase slowed to +0.1 percent in April. Prices fell -0.3 percent in May, turned up again in June>August, then fell in September.
• Veterinary – Inflation has been consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A surge began in December 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices turned up again and despite some dips they have stayed above the CPI since July 22. In 2023, prices grew January>May, stabilized June>July, fell in August, then increased in September.
• Total Pet – Petflation is a sum of the segments. In December 2021, the pricing surge began. In March>Jun 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. Except for five individual monthly dips, prices in all segments increased monthly January>June 2023. In July>August, there were five more dips but only one in September – Services. Petflation has been above the U.S. CPI since November 2022.

Next, Gibbons will turn his attention to the YOY inflation rate change for September and compare 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 5.7 percent in September, but it is still 1.5 times the national rate. The chart allows the comparison of the inflation rates of 2022>2023 to 2021>2022 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 +0.2 percent vs. August and were up 3.7 percent vs. September 2022, the same as August. Grocery inflation is down again, to +2.4 percent from +3.0 percent. Haircuts prices were unchanged from last month but only one of nine categories had a decrease, compared to four in August. Pet Services had the decrease, -0.5 percent. The national YOY monthly inflation rate for September is unchanged from August but only 45 percent of the 2021>2022 rate. The 2022>2023 inflation rate for all categories is now below 2021>2022. However, the difference is slight for Non-Vet Services and Haircuts. In the 2021>2023 measurement, it is evident 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 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 60 percent of the national CPI so they are very influential. Pet products have a very different pattern. The 2021>2023 inflation surge provided over 93 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 August. The YOY increase remained stable at +3.7 percent. It peaked at +9.1 percent back in June 2022. The targeted inflation rate is <2 percent so we are still 85 percent higher than the target. After 12 straight declines, we had  two lifts, so stability is an improvement. The current inflation rate is below 2021>2022 but the 2021>2023 rate is still 12.2 percent, 62 percent of total inflation since 2019. How many households “broke even” by increasing their income by 12 percent in two years.
• Pet Food– Prices are +0.3 percent vs. August and +7.6 percent vs. September 2022. They are also 3.2 times the Food at Home inflation rate, which Gibbons notes is not good news. The YOY increase of 7.6 percent is being measured against a time when prices were 14.4 percent above the 2019 level, but that increase is still 2.3 times the pre-pandemic 3.3 percent increase from 2018 to 2019. The 2021>2023 inflation surge has generated 96.2 percent of the total 23.5 percent inflation since 2019.
• Food at Home – Prices are up +0.1 percent from August. The monthly YOY increase is 2.4 percent, down from 3.0 percent in August and considerably lower than July>September 2022 when it exceeded 13 percent. The 25.8 percent inflation for this category since 2019 is 30 percent more than the national CPI and remains second to Veterinary. Sixty one percent of the inflation since 2019 occurred 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 up +1.0 percent from August but only +0.1 percent vs. September 2022. They still have the lowest increase since 2019. As Gibbons noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 87 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.
• Veterinary Services – Prices are up +0.9 percent from August. They are +7.5 percent from 2022 and are still in second place behind Food (+7.6 percent) in the pet industry. However, they are still the leader in the increase since 2019 with 28.7 percent 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 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 2020>2021. Prices grew 1 percent from August but are -2.6 percent vs. 2022. Prices have now deflated for five 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. September 2023 prices were -0.5 percent from August but +6.0 percent vs. 2022, which is down from 7.2 percent in last month and much lower than 8.0 percent in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 59 percent of the total since 2019 occurred from 2021>2023.
• Haircuts/Other Personal Services – Prices are unchanged from August but +4.8 percent from 2022, the lowest rate since 2019. Inflation has been rather consistent as just 47 percent of the inflation from 2019>2023 happened from 2021>2023.
• Total Pet– Petflation is now 48 percent lower than the 2021>2022 rate, but still 1.5 times the national CPI. For September, +5.7 percent is the third highest rate since 1997 (2022: 11.0 percent; 2008: 9.5 percent). Versus August, prices grew for all but Services so Total Pet was +0.4 percent. An August>September increase has happened in 13 of the last 24 years, so it was not a surprise. Food and Veterinary 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 looks at the YTD numbers.

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The increase from 2022 to 2023 is the biggest for four of nine categories (all pet). The 2022>2023 rate for Haircuts is equal to 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 47 percent from 2021>2022 and 2.2 percent less than the average increase from 2019>2023, but it’s 91 percent more than the average annual increase from 2018>2021. Sixty nine percent of the 19.0 percent inflation since 2019 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; 95.6 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 41 percent. Gibbons notes the impact of supply chain issues on the Grocery category as 72 percent of the inflation since 2019 occurred from 2021>2023.
• Pets & Pet Supplies – Although prices rose in September, the YTD inflation rate is down to 3.8 percent. Prices deflated significantly in both 2020 and 2021 which helped to create a very unique situation. Prices are up 10.6 percent from 2019. Prices are up 11.3 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 -0.1 percent YTD, the only deflation in any segment.
• Pet Services – May 2022 set a record for the biggest YOY 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. YTD September fell a little from 7.0 percent to 6.8 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 2022, prices turned up again. Since 2021, inflation has been a consistent 5+ percent, 90 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 June>August 2023. Supplies prices stabilized April>May, grew June>October, fell in November, rose in December>February, fell in March, rose in April>May then fell in June>August. Prices in both segments turned up in September. The Services segments have also had ups and downs, but they have generally inflated. The net is a YTD Petflation rate vs. 2022 of 9.1 percent, 2.1 times the CPI. In May 2022, it was 5.8 percent below the CPI.

Petflation is slowing, but still strong. Petflation dropped from 6.6 percent in August to 5.7 percent in September. This is less than half of the record 12.0 percent set in November, but still the third highest rate for the month. According to Gibbons, more bad news is that nine of the last 14 months have been over 10 percent and the current rate is still 3.6 times the 1.6 percent average rate from 2010>2021. It’s also 1.5 times the national rate. Gibbons notes that the demographic analysis of the annual Consumer Expenditure Survey, which is conducted by the US 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.

Inflation is not just a singular event. It is cumulative. Total pet prices are up 5.7 percent from 2022, but they are up 17.4 percent from 2021 and 22.2 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. Pet Food inflation rate is dropping, and Pet Supplies prices are now only up 0.1 percent vs. September 22. It’s just a start, and Gibbons is hoping that it accelerates “down.”