Navigating the Shifting Landscape of Pet Prices: Insights and Trends

The pet industry has been a dynamic and ever-evolving landscape, with pet owners closely monitoring the fluctuations in prices. In a recent report, John Gibbons of PetBusinessProfessor.com delves into the latest trends and insights surrounding the state of pet prices in the United States.

Uncovering the Nuances of "Petflation"

The Rise and Fall of "Petflation"

According to Gibbons' June report, pet prices saw a 0.3% increase from May 2024, with "petflation" rising to 2.0%, up from 1.6% in the previous month. However, this rate remains 33% below the national inflation rate. Interestingly, in January 2024, the "petflation" rate was a staggering 52%.

Comparing Pet Prices to the National CPI

The national year-over-year monthly Consumer Price Index (CPI) rate stood at 3.0% in June, down from 3.3% and on par with the 2022-2023 rate. However, this figure is only 33% of the 2021-2022 rate, indicating a significant slowdown in overall inflation.

Fluctuations in Pet Food Prices

In June 2024, pet food prices increased by 0.7% from the previous month, but decreased by 0.2% compared to June 2023. Gibbons attributes this surge in "petflation" to the recovery from a deflationary period in 2021, where pet product prices were still in the process of stabilizing.

Analyzing the Inflation Surge from 2021 to 2024

The inflation surge from 2021 to 2024 accounted for 104% of the overall inflation since 2019, a significant portion of the total price increases. Gibbons explains that this phenomenon occurred due to the recovery from the deflationary period in the pet products market.

Comparing 2022 to 2024

In 2022, the U.S. CPI saw a 0.03% increase from May, with the year-over-year (YOY) increase at 3.0%, down from 3.3%. The peak was reached in June 2022 at 9.1%, and the targeted inflation rate for 2023 is 2.3%. However, the 2021-2024 rate is still 15.6%, which is 68.7% of the total inflation since 2019.In the pet food category, prices increased by 0.7% compared to May and decreased by 0.2% compared to June 2023, a significant improvement from the -1.1% drop in the previous year. Despite this, pet food prices remain significantly below the Food at Home inflation rate of 1.1%. The YOY drop of 0.2% is being measured against a time when prices were 23.1% above the 2019 level, and the current decrease is still less than the 0.7% drop from 2019 to 2020. The 2021-2024 inflation surge has generated 98.7% of the total 23.4% inflation since 2019.

Year-to-Date (YTD) Comparison: 2022 vs. 2024

The YTD U.S. CPI rate for 2023-2024 stands at 3.2%, down from 3.3% in May, but also 35% lower than the 2022-2023 rate and 61% less than the 2021-2022 rate. This figure is 24% below the average YOY increase from 2019 to 2024, but still 52% more than the average annual increase from 2018 to 2021. Notably, 76% of the 22.7% inflation since 2019 occurred from 2021 to 2024, indicating that the recent surge in inflation is a significant concern.In the pet food category, the YTD inflation rate is 1.3%, down from 1.6% in May and 91% less than the 2022-2023 rate. This figure is also 80% lower than the 2021-2022 rate and 24% below the average rate from 2018 to 2020. Pet food has the highest 2022-2023 rate on the chart and remains in second place in the 2021-2024 rates. Gibbons attributes the low YTD prices to the deflation in the first half of 2021, followed by a surge in prices in 2022 and 2023.

Tracking the Producer Price Index (PPI) for Pet Food

The retail price changes in the pet food market typically mirror the dog and cat PPI, but with a slight lag. The PPI peaked in May 2023, fell slightly in June-August, turned up in September/October, flattened in November, fell in December-February, turned up in March, and fell in April-May, before rising again in June. Despite a minor lift in June, the PPI in the Other Pet Food segment continues to deflate.Gibbons notes that the dog canned/wet food category is the primary driver behind the PPI surge, including a small increase in February 2024. However, prices have only increased by less than 1% since March 2023, indicating 15 months of relative stability.

Analyzing the Retail CPI for Pet Food

The Retail CPI for Pet Food is down 0.2% from June 2023 and up 0.7% compared to May 2024. The "Other pet food" category, on the other hand, has seen a more significant decline of 7.5% from June 2023. Gibbons points out that this category has been consistently falling over time, with a 7.8% drop from June 2021 and a 23.9% decrease from June 2019.Gibbons further notes that all categories, except for canned and dry dog food, have converged around a 30% increase from December 2019. He also suggests that the small increase in February 2024 could be an early indication of the typical spring lift, which normally starts in May and lasts for two months, followed by a period of price stability for eight months. In 2023, a one-month lift occurred in March, and prices remained stable for 10 months.