Pet Business Professor Report: July Petflation Pattern Matches National Inflation Rate

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The monthly Consumer Price Index (CPI) peaked back in June 2022 at 9.1 percent, according to the Pet Business Professor John Gibbons, then it began to slow until turning up in July/August 2023. Gibbons reports that prices fell in October>December 2023, then turned up January>July 24. However, the CPI slowed in July to +2.9 percent from +3.0 percent in June. As Gibbons has noted in the past, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so he continues to publish 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, but at 1.9 percent in July, it is 34.5 percent below the national rate, a big change from +52 percent in January. Gibbons will into the data, with reports that 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 2024 vs. 2023 that will include pet segments and relevant human spending categories, as well as:
  1. CPI change from the previous month.
  2. Inflation changes for recent years (2022>2023, 2021>2022, 2020>2021, 2019>2020, 2018>2019)
  3. Total inflation for the current month in 2024 vs. 2019 and vs. 2021 to see the full inflation surge.
  4. Average annual year-over-year (YOY) inflation rate from 2019 to 2024.
• Year-to-date (YTD) comparisons
  1. 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 July 2022 to July 2024. He uses December 2019 as a base number to track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give a visual image of the flow of pricing. The year-end numbers and those from 12 and 24 months earlier are included. Gibbons also included and highlighted in pink the cumulative price peak for each segment. In July, pet prices were down -0.1 percent from June. Prices for all segments but Non-Vet Services were lower.

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In July 2022, the CPI was +15.3 percent and Pet was +12.1 percent. Prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 2021. In 2022, Petflation surged. Food prices consistently grew but the others had mixed patterns until July 2022, when all increased. In August>October Petflation took off. In November>December, Services and Food prices grew while Vet and Supplies prices stabilized. In January>Apr 2023, prices grew every month except for one dip by Supplies. In May, Pet Product prices grew while Services slowed. In June/July, this reversed. In August, all but Services fell. In September/October, this flipped. In November, all but Food and Vet fell. In December, Supplies and Vet drove prices up. In January>March 24, pet prices grew despite a few drops. In April, prices in all but Vet fell. In May, all but Food grew. In June, Products drove a lift. In July, all but Services fell.

• 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 2023, dipped in October>December, then rose January>July 24, but 31.5 percent of the 22.4 percent increase in the 55 months since December 2019 happened from January>June 2022 – 10.9 percent of the time.
• Pet Food – Prices were at December 2019 levels from April 2020>September 2021. They grew and peaked in May 2023. In June>August they fell, grew September>November, fell December>February, rose in March, fell April>May, grew in June, fell in July. And 97 percent of the lift was in 2022/2023.
• Pet Supplies – Supplies prices were high in December 2019 due to tariffs. They then had a “deflated” roller coaster ride until mid-21 when they returned to December 19 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating 2009. They plateaued February>May, grew in June, flattened in July, then turned up in August>October to a new record. Prices stabilized in November>December but grew in January>February 2023. They fell in March, but they went on to set a new record in May. The rollercoaster continued with December>February lifts, followed by March/April drops and May/June lifts, before a July drop.
• Pet Services– Inflation is usually 2+ percent. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but with fewer outlets. Inflation grew in 21 with the biggest lift in January>April. Inflation was strong in 2022 but prices got on a rollercoaster in March>June. They turned up July to March 2023, but the rate slowed in April and prices fell in May. June>August: Up, September>December: Down, January>March: Up, Apr: Down, May: Up, June: Down, July: Up.
• Veterinary – Inflation has been consistent. Prices turned up in March 20 and grew through 2021. 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 CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 2022. In 2023, prices grew January>May, stabilized June/July, fell in August, grew September>December, fell in January 2024, grew February>May and then fell in June>July.
• Total Pet – Petflation is a sum of the segments. In December 2021, the price surge began. In March>June 2022 the segments had ups & downs, but Petflation grew again from July>November. It slowed in December, grew January>May 2023 (peak), fell June>August, grew in September/October, then fell in November. In December prices turned up and grew through March 2024 to a record high. Prices fell in April, rose in May and June (a new record) then fell in July but Petflation is just 2/3 of the National CPI.

Next, we’ll turn our attention to the YOY inflation rate change for July and compare it to last month, last year and to previous years. We will also show total inflation from 2021>2024 and 2019>2024. Petflation slowed to 1.9 percent, down from 2.0 percent in June, and it is now 34.5 percent below the National rate. In January, it was +52 percent. The chart will allow you to compare the inflation rates of 2023>24 to 2022>2023 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. We’ve included some human categories to put the pet numbers into perspective.

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Overall, prices were +0.1 percent from June and were +2.9 percent vs. July 2023, down from +3.0 percent last month because there was a bigger June>July price lift in 2023. Only four categories had price increases from last month – Pet Services, Haircuts, Groceries and the CPI.

The national YOY monthly CPI rate of 2.9 percent is down from 3.0 percent and now below the 2022>2023 rate. It’s only 34 percent of 2021>2022. The 2023>2024 rate is below 2022>2023 for all but Pet Services and Medical Services.

Pet Products have a unique pattern. The 2021>2024 inflation surge provided 98 percent of their overall inflation since 2019. This happened because Pet Products prices in 2021 were still recovering from a deflationary period. Services expenditures now account for 64.1 percent of the National CPI, so they are very influential. Their current CPI is +4.9 percent while the CPI for commodities is -0.4 percent. This clearly shows that Services are driving the current 2.9 percent inflation rate.

• U.S. CPI – Prices are +0.1 percent from June. The YOY increase is 2.9 percent, down from 3.0 percent. It peaked at +9.1 percent back in June 202022. The targeted inflation rate is 2023 but the 2021>2024 rate is still +15.2 percent, 67.3 percent of the total inflation since 2019. Inflation was low in July 2021.
• Pet Food – Prices are -0.03 percent vs June and -0.04 percent vs July 2023, up from -0.2 percent. They are still significantly below the Food at Home inflation rate, +1.1 percent. The YOY drop of -0.04 percent is being measured against a time when prices were 2022.9 percent above the 2019 level and the current decrease is still far less than the -0.7 percent drop from 2019 to 2020. The 2021>2024 inflation surge has now generated 100 percent of the total 2022.7 percent inflation since 2019.
• Pets & Supplies – Prices were down -0.8 percent from June and are only +0.2 percent vs July 202023. They have the lowest increase since 2019. As Gibbons has noted, prices were deflated for much of 2020>2021. As a result, the 2021>2024 inflation surge accounted for 95.3 percent of the total price increase since 2019. Prices reached an all-time high in October 2022 then deflated. Three months of increases pushed them to a record high in February 2023. Prices fell in March, rose in April/May to a new record, fell in June>August, grew September>October, fell in November, grew December>Feb, fell March>Apr, rose May>June (new record), then fell in July.
• Veterinary Services– Prices are -0.1 percent from June but +6.2 percent from 202023. They fell to second place, behind Services, in the Pet Industry. However, they are the leader in the increase since 2019 with +37.6 percent and since 2021, +28.4 percent. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 2022 and 2023. It is still high in 2024, so 75.5 percent of the cumulative inflation since 2019 occurred from 2021>2024.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. In 2024 prices surged January>March dropped in April, rose in May, fell in June, then soared to +6.6 percent in July. Inflation peaked at +8.0 percent in March 2023. Now, 68 percent of their total 2019>2024 inflation has occurred since 2021. In December, it was only 49 percent. They still have the second highest 19>24 rate.
• Total Pet – Petflation slowed to 1.9 percent from 2.0 percent in June but is still 78 percent less than the 2022>2023 rate and 34.5 percent less than the U.S. CPI. For July, 1.9 percent is 37.6 percent below the 3.1 percent average rate since 1997. Vs June, prices fell -0.1 percent as all but Non-Vet Services were lower. A June>July price decrease hasn’t happened since 2016, and it’s only happened in eight of the last 27 years, so this month’s data was a bit surprising to Gibbons. In terms of Petflation, 2024 appears to Gibbons to be actively moving back toward a more normal pattern. However, he says the path to get there may be unusual, and there is still a long way to go.

Now, Gibbons takes a look at the YTD numbers.

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The inflation rate for 2022>2023 was the highest for four of nine categories: Pet Food, Services, Veterinary and Total Pet. It comes as no surprise that Veterinary Services has the highest average rate (6.7 percent).

• U.S. CPI – The 2023>24 rate is 3.2 percent, the same as June, but also down 30 percent from 2022>2023 and 61 percent less than 21>2022. It is also 24 percent below the average YOY increase from 2019>2024, but it’s still 45 percent more than the average annual increase from 2018>2021. 74 percent of the 2022.7 percent inflation since 2019 occurred from 2021>2024. Inflation is a big problem that started recently.
• Pet Food – YTD inflation is 1.1 percent, down from 1.3 percent in June and 92 percent less than the 2022>2023 rate. Now, it is also 85 percent lower than 21>2022 and 10 percent below the average rate from 2018>2020. Pet Food has the highest 2022>2023 rate on the chart and remains in 2^nd place in the 21>24 rates. Deflation in the first half of 2021 kept YTD prices low then prices surged in 2022 and especially in 2023. 95 percent of the inflation since 2019 occurred from 2021>2024.
• Pets & Pet Supplies – Prices increased January>Feb, fell March>April, rose May>June then fell in July. The 2024 inflation rate of 0.2 percent is only higher than the deflation in 2019>2020 and 2020>2021. Supplies have the lowest inflation since 2019. The only significant increases were 7.2 percent in 2022 and 5.0 percent in 2023. The 2021 deflation created a unique situation. Prices are up 11.3 percent from 2019 but 113 percent of this increase happened from 2021>2024. Prices are up 12.8 percent from their 2021 bottom.
• Veterinary Services – Inflation was high in 2019 and steadily grew until it took off in late 2022. The rate may have peaked in 2023, but it is still going strong at the start of 2024, +7.7 percent, the highest on the chart. They are also No. 1 in inflation since 2019 and since 2021. At +6.7 percent, they have the highest average annual inflation rate since 2019. It is 1.6 times higher than the National Average but 2.4 times higher than the Inflation average for Medical Services. Strong Inflation is the norm in Veterinary Services.
• Pet Services – After falling in late 2023, prices surged in 2024, except for drops in April and June. The 2023>2024 inflation rate of 5.5 percent is second to Vet in the pet industry. It is 20 percent less than 2022>2023 and 8 percent below 2021>2022. However, it is still 1.7 times higher than the 2018>2021 average rate. Pet Services is second in 2019>2024 inflation; however, it is only fifth in inflation since 2021.
• Total Pet – YTD Petflation is 2.7 percent, down from 2.9 percent. It is 73 percent less than 2022>2023 but 19 percent higher than the 2018>21 average rate. However, it is still 16 percent below the CPI. Despite the May and June price lifts, Petflation has slowed in 2024. This is primarily being driven by drops in Pet Food inflation, but YTD Supplies inflation is also low. Services prices set a new record in July, but Vet prices continued to fall. The July drops all contributed to the decrease in the YTD Pet CPI.

According to Gibbons, Petflation has slowed in 2024. July was 38 percent below the average for the month and 34.5 percent lower than the National CPI. This is about the same as it was back in 2021. One fact is often ignored in the headlines, claims Gibbons, which is that inflation is cumulative. Pet prices are 20.8 percent above 2021 and 25.0 percent higher than 2019.

Gibbons believes those are big lifts. In fact, in July prices for Services set a record, while prices for Total Pet and all other segments are less than 0.8 percent below the highest in history. Only Supplies prices (+11.3 percent) are less than 24 percent higher than 2019. Since price/value is the biggest driver in consumer spending, Gibbons expects inflation to continue to affect the pet industry. Services will be the least impacted as it is driven by high income CUs. He also expects Veterinary to see a reduction in visit frequency. The product segments will see a more complex reaction. Supplies will likely see a reduction in purchase frequency and some pet parents may even downgrade their pet food.