Spending, CPI, demographics of overall market

Retail Channel Monthly $ Update – June Final & July Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Report for June and then go to the Advance Report for July. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we’ll focus on Pet Relevant Channels.

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the June Final. All were down from May. However, all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the negatives (11) were more than in May (7). Gas Stations are still really down vs 2019. The biggest change may be that Relevant Retail is again “really” down monthly vs 22. (All $ are Actual, Not Seasonally Adjusted)

The June Final is $0.4B more than the Advance. Specifically, Restaurants: +$0.9B; Auto: +$1.0B; Gas Stations: -$0.7B; Relevant Retail: -$0.7B. The drop in sales for Relevant Retail from the Advance Report made one big difference. In the Advance Report for June vs 2022, their “real” sales were +0.1%. In the Final June Report their “real” sales vs June 2022 were -0.1% – a small, but significant change. Sales were down from May for all big groups but actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to again drop monthly and YTD vs 2022. There were 11 real sales drops, 8 vs 2021. Restaurants have the most growth and are the only group with all positives. The big deal is that real sales for Relevant Retail vs 22 & 21 are all negative. The monthly data vs a year ago has now been negative 7 of the last 8 months. They are #1 in performance since 2019 but only 49% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in June in the Stacked Bar Graph Format

Overall– Only 2 were up from May, but vs 22, 7 were up vs June 22 and 10 Ytd. 7 were “really” down monthly & Ytd. Vs 2021, 9 had increases but only 5 monthly & 3 Ytd were real. Vs 2019, Off/Gift/Souv & Disc Dept Strs were really down.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.7% since 2019. Prices for the Bldg/Matl group have inflated 20.2% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 22.1% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.4%, Real: 1.3%; Farm: 11.5%, Real: 5.2%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. They have been very different in inflation but the gap is closing as the Grocery rate is now only 12% higher than Drugs/Med products. Drug Stores are positive in all measurements and 74% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 8% is real growth. Avg 19>23 Growth: Supermarkets: +6.3%, Real: +0.6%; Drug Stores: +5.4%, Real: +4.0%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up from May but are only actually & really positive YTD vs 2022 and 2019. Prices are still deflating -0.9%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 60% of their 43.7% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.5%; Real: +6.0%.
  • Gen Mdse Stores – All were down vs May. However, actual sales vs 22, 21 & 19 were up for all but Disc Dept Strs vs June 22 & 21. In real sales, Clubs/SupCtrs were only up vs June 21 but $/Value Stores were up in all but Ytd vs 21. Disc Dept Stores are the worst performer and are now really down -0.9% vs 2019. The other channels average 35% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.7%, Real: +2.7%; Disc. Dept.: +2.5%, Real: -0.2%
  • Office, Gift & Souvenir Stores – Actual sales are up 1.3% from May but down from June 22. They were up in all other measurements vs 22, 21 & 19. Their real sales numbers are all negative including -6.8% Ytd vs 2019. Their recovery started late and their slow progress may have stalled in June. Avg Growth Rate: +0.9%, Real: -1.7%
  • Internet/Mail Order – Sales are down from May but above $100B again at $100.8B – another monthly record. All measurements are positive, but their growth is only 54% of their average since 2019. However, 80% of their 98% growth since 2019 is real. Avg Growth: +18.6%, Real: +15.4%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, turned up in Mar>May, then fell in June. Ytd Real sales are down vs 22, but all other measurements are positive. They are still the % increase leaders vs 2021 and 72% of their 56.6% growth since 2019 is real. Average 19>23 Growth: +11.9%, Real: +8.9%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 7 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 4 vs 2022 & 5 vs 2021. Inflation has impacted sales increases. June was not a strong month. The lift was 30% below May & 50% of Jan & Feb. The impact is very visible at the retail channel level. Inflation grew slightly in July. Let’s look at the impact on the Advance Retail $ales for July.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales got on an up/down rollercoaster. All were down in June and Total Retail was down in July but 2 groups were up. Except for Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some stability in that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are positive, including monthly sales vs 22 for Relevant Retail. Of Note: The lift vs 2022 is up from June for Relevant & Total Retail but still far below Jan & Feb levels.

Overall – Inflation Reality – Total, Auto & Gas prices all deflated. For Relevant Retail, the rate was slightly below the sales lift. For Restaurants, inflation remains high, +7.1% but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail vs last year are positive again. They have been negative for 8 of the last 10 months. However, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales have been on a rollercoaster. They grew in May, fell in June & grew in July. Inflation has become deflation, but sales growth is still low. Sales are up 2.5% vs last year. That’s only 32% of their average 19>23 growth. Also, real sales are down monthly and Ytd vs 21 and only 35% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still see its cumulative impact. Avg 2019>23 Growth: +7.9%, Real: +3.0%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 7.1% in June from 7.6% last month but is still +15.0% vs 21 and +21.4% vs 19. 39.6% of their 41.4% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +9.0%, Real: +3.9%. They just account for 13.2% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, then fell in Jun>Jul. Again, only monthly & Ytd real sales vs 21 are negative. Prices are -1.3% vs 22, monthly & Ytd. Only 7% of 19>23 growth is real. Avg 2019>23 Growth: +6.8%, Real: +0.6%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>Jul, -15.0% Ytd vs 22. However, prices are still +15.3% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Real Ytd sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.2%, Real: -1.2%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in Jun>Jul, but all actual sales are up vs 22, 21 & 19. Real sales are only down Ytd vs 22 & 21. Monthly Real sales vs last year are again positive but have been negative in 8 of the last 10 months. 48% of their 19>23 $ are real – #1 in performance. Avg 2019>23 Growth is: +8.3%, Real: +4.3%. This big group is where America shops. The fact that real sales turned positive again gives us hope.

Inflation is slowing but the cumulative impact is still there. Sales increases are also slowing, but the fact that 55% of all real sales numbers vs 22 & 21 are positive again is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a continued drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive in 2 of the last 3 months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at July by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.3%, Real: +4.3%. Only 4 channels were up from June but 6 were up vs 22 & 8 vs 21. Only 4 had a “real” increase vs 22 or 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are up from June but down for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.15%, Real: -2.5%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are down vs June but up in all other measurements. Their real sales are down in all measurements but Ytd vs 19. Only 35% of their 27.8% 19>23 lift is real – the impact of inflation. Avg Growth: +6.3%, Real: +2.4%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are up from June and in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 6.9% of the growth since 2019 is real. Avg Growth: +6.2%, Real: +0.5%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from June but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 73% of their 23.9% growth from 2019 is real. Avg 2019>23 Growth: +5.5%, Real: +4.1%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. $ales are up from June and vs 22, 21 & 19. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 63% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.8%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are down from June and in all other measurements but Ytd vs 2019. Their real sales are again all down, even vs 2019. Avg 2019>23 Growth: +3.6%, Real: -0.5%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are down from June and in all measurements but Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.5%, Real: +2.4%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 7.4%. Sales are down from June and they are again all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 20% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +7.7%, Real: +1.7%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are down from June but positive for all but Ytd vs 21. Real sales are down for all but Ytd vs 22 & 19. Prices deflated again in July and their inflation rate has been much lower than most groups so 65.7% of their 30.6% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.7%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are down vs June but positive in all but real $ vs July 22. Their increase vs 2021 fell to 2nd place but vs 2019 they are still 2nd. NonStore is #1 in both. 67% of their 43.6% 19>23 growth and even 50% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.5%, Real: 6.6%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are up from June and all other measurements are positive. 78% of their 88.0% growth since 2019 is real. Their Avg Growth: +17.1%, Real: +14.0%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed since July 22, which should help the Retail Situation. Sales were down from June for 3 big groups and 7 smaller channels. Inflation continues to slow in most channels and even deflate in a few. However, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 2 of the last 3 months but are still negative for 7 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care, Electronics/Appliances  and Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

 

Petflation 2023 – July Update: Slows again, but still +8.7% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. July prices grew 0.2% from June and the CPI was +3.2% vs 2022, up slightly from +3.0% last month – a pause in the decline. Grocery pricing continues to slow. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +3.6%, now with 5 consecutive months below 10%. 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.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July 2022, but Petflation has generally increased. It passed the National CPI in July 2022 and is now +8.7% in July, 2.7 times the national rate of 3.2%. 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 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from July 2021 to July 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see 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. This will give you some key waypoints. In July, Pet Products prices were down again from last month, but they increased in both Service segments.

In July 2021, the CPI was +6.2% and Pet prices were +2.8%. Like the U.S. CPI, Veterinary and Services prices generally inflated after mid-2020, 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 Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>Apr, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June & July this pattern was reversed. Petflation has been above the CPI since November 22.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Jul but 36% of the overall 19.0% increase in the 43 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21, when they turned up. There was a sharp lift in Dec 2021, and it continued until the Jun/Jul dip. 93% of the 22.9% increase has occurred 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 Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, a new record. They fell in March, set a record in May, then fell in Jun>Jul.
  • Pet Services– Normally inflation is 2+%. 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 Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up again in Jun>Jul.
  • 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 Oct & Dec dips they have stayed above the CPI since July. In 2023 prices slowly grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May, then fell in Jun>Jul. Except for 7 individual monthly dips, including 4 in Jun>Jul, prices in all segments have increased monthly in 2023. It has been ahead of the cumulative U.S. CPI since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for July and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation was again below double digits at 8.7% in July but is still over 2.7 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.2% vs June and were up 3.2% vs July 2022. The Grocery increase is down again, to +3.6% from +4.7%, but still impacts consumers. Prices often rebound in July so it’s not surprising that only 3 of 9 categories had decreased prices from last month, compared to 5 in June 3 in May and 1 in April. Of the 6 categories with increases, 3 were from Pet – Veterinary, Services and Total. 3 of the 6 were over 0.3%, Haircuts: 0.6%; Groceries & Pet Services: 0.4%. The national YOY monthly inflation rate for July is up from June but is still much lower than the 21>22 rate. All but 3 categories – Veterinary, Non-Vet Services and Haircuts have a similar pattern. In the 2 Pet Categories the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019. In our 2021>2023 measurement you also can see that over 67% of the cumulative inflation since 2019 occurred from 21>23 for all segments but Pet Services, Medical Services, Haircuts/Personal Services and the U.S. CPI. Note: These are service expenditures and show its increasing influence on the CPI. Pet Products are unique. The 21>23 inflation surge provided over 98% of the overall inflation since 2019. This happened because Pet Products prices were deflated in 2021.

  • U.S. CPI– Prices are +0.2% from June. The YOY increase rose to +3.2% from 3.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 50% higher than the target. This is the 1st lift after 12 straight declines. Not good news. It’s good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.0%, 63% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.2% vs June and +10.6% vs July 2022. They are also 2.9 times the Food at Home inflation rate – not good news! The YOY increase of 10.6% is being measured against a time when prices were 11.1% above the 2019 level, but that increase is still an incredible 2.9 times the pre-pandemic 3.6% increase from 2018 to 2019. The 2021>2023 inflation surge generated 100% of the total 22.7% inflation since 2019.
  • Food at Home – Prices are up +0.4% from June. The monthly YOY increase is 3.6%, down from 4.7% in June and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.7% Inflation for this category since 2019 is 34% more than the national CPI and remains 2nd to Veterinary. 67% 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 fell -0.5% from June, and they still have the lowest increase since 2019. They also stayed in last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices were deflated for much of 2021 so the 2021>2023 inflation surge accounted for 96% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June & July.
  • Veterinary Services – Prices are up 0.1% from June. They are +10.63% from 2022 and took over 1st place from Food (+10.61%) in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 29.6% compared to Food at home at 25.7%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70% of the 4 years’ worth of inflation occurred in the 2 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 20>21. In July prices fell -0.3% from June and are -1.5% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 33% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. July 23 prices were up +0.4% from June and +6.3% vs 2022, which is the same as last month but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 59% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.6% from June and +5.3% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 46% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is now 4% lower than the 21>22 rate, but 2.7 times the National CPI. For July, +8.7% is 2nd only to +9.1% in 2022. Vs June, Product Prices fell while Services increased so Total Pet was +0.03%. A June>July increase has happened in 19 of the last 26 years so a small increase was expected. Food & Veterinary are still the Petflation leaders, but only Service segments have a 22>23 rate above 21>22. Pet Food has 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

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.0%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 45% from 21>22 and only 4.5% more than the average increase from 2019>2023, but it’s 2.1 times the average annual increase from 2018>2021. 71% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 95.2% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 57%. You can see the impact of supply chain issues on the Grocery category as 74% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down to 5.0% as prices fell again in July. Prices deflated significantly in in both 2020 & 2021 which helped to create a very unique situation. Prices are up 11.1% from 2019 but 114% of this increase happened from 2021>23. Prices are up 12.6% from their 2021 “bottom”.
  • Veterinary Services – They are still #1 in inflation since 2019 but they have only the 3rd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, prices have 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 a rate actually 77% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 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>Apr. The January 2023 increase of 8.4% set a new record. YTD July again slipped a little to 6.9%. 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 & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. Since 2021 inflation has been a consistent 5+%, 90% higher than 18>19. Consumers are paying 21% 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 continued to climb until Jun/Jul 23. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in Jun>Jul. The Services segments have also had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.0%, 2.2 times the National rate. In May 22 it was 5.8% below the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 9.6% in June to 8.7% in July. This is below the record 12.0% set in November, but still 2nd highest for the month. More bad news is that 9 of the last 12 months have been over 10% and the current rate is still 5.4 times more than the 1.6% average rate from 2010>2021. It’s also 2.7 times the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have 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 the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 8.7% from 2022 but they are up 18.5% from 2021 and 22.7% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need it again.

U.S. Pet Services Spending (Non-Vet) $10.87B (↑$3.43B): 2022 Mid-Year Update

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In our analysis of Pet Food & Supplies Spending, we saw strong growth in the 2nd half of 2021 which sent Supplies to a record high and returned Food to near its Pandemic binge high. Both had continued but slowed growth in early 2022. Strong inflation may have been a factor. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $10.87B, up $3.43B (+46.2%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. Closures due to the pandemic drove spending down $1.73B by yearend, essentially returning to the level of 2017. In 2021 things opened up and spending began to rebound. This deserves a closer look. First, we’ll look at Services spending history since 2014.

Here are the 2022 Mid-Yr Details:

Mid-Year 2022: $10.87B; ↑$3.43B (+46.2%) vs Mid-Yr 2021

Jul > Dec 2021: ↑$1.66B

Jan > Jun 2022: ↑$1.77B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free-standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, the biggest annual increase in history. Prices turned up again in the 1st half of 2019, +2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 consumers Value Shopped again so spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell precipitously, -$1.73B to $6.89B, about the same as yearend 2017. In 2021 things opened up again and spending bounced back, +$0.55B vs the 1st 6 months of 2020. Unlike Food and Supplies the increase continued to accelerate even into 2022, despite an inflation rate of 6+%. This produced a record 12-month increase and a new record high, $10.87B.

Let’s take a closer look at some key spending demographics – Age and Income.

In the graphs that follow we compare spending for the 12 months ending 6/30/22 to the previous 12 months. The graphs also include the 2021 yearend $, so you can see spending changes in the 2nd half of 2021 and the 1st half of 2022.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

Here’s how you get the change for each half using the Over $70K group as an example:

Mid-yr Total Spending Change: $8.41B – $5.04B = Up +$3.37B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2021: Subtract Mid-21 ($5.04B) from Total 2021 ($6.81B) = Spending was up $1.77B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($6.81B) from Mid-22 ($8.41B) = Spending was up +$1.60B in 1st half of 2022.

  • With the Over/Under $100K measurement, you see how Services Spending is definitely skewed towards higher incomes. The halfway spending point is about $141K so about 20% of CUs spend 50% of Services $. However, spending in both the under & over $100K groups grew in both halves.
  • All groups $70K> had steady growth. The <$70K groups had basically 2 different patterns. Surprisingly, the <$30K had growth in both halves. The $30>70K groups had decreased spending despite a 2022 lift by $30>50K.
  • The $50>70K group had the worst performance. They had the biggest decrease, -20.9% and decreases in both halves. In fact, they were the only segment with decreased spending in the 1st half of 2022.
  • The over $150K group has 16.7% of the CUs but accounts for 46.2% of Services $. This is actually a much larger share than the 37.6% that they had in pre-pandemic 2019. The pandemic has increased the importance of this group.
  • Income, especially when it is over $150K, is by far the biggest factor in the discretionary spending in the Services segment so Services spending is more unbalanced in regard to income. The highest income groups are more driven by convenience than value so high inflation rates are likely to actually increase spending because of higher prices.

Now, Services’ Spending by Age Group.

  • Basically the <25 yr-olds spent less while everyone else spent more. Their spending fell slightly in both halves.
  • The 55>64 group had the biggest increase, up +$1.17B (+85.4%) and held on to the top spot in Services spending.
  • The 35>44 yr-olds spent +$0.79B more (+50.3%) and held on to the 2nd spot in spending.
  • The 45>54 yr olds had a small increase despite a drop in the 2nd half of 2021. They are #3. In Mid-2021 they were #1.
  • Although their lift was small this year, 25>34 yr-olds are the only group with consecutive mid-year increases.
  • The 65> groups were up $1.1B (+80.3%) with lifts in both halves, including a +$0.65B increase in the 1st half of 2022. The 65>74 yr-old Baby Boomers led the way – No Surprise.
  • All groups but <25 had a spending lift in the 1st half of 2022, a big change from Food & Supplies.

Now let’s look at what is happening in Pet Services spending at the start of 2022 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories. Remember, the lift in the 1st half of 2022 was +$1.77B vs 2021 and +$2.32B vs 2020.

2022 has started even better than 2021 as spending continues to grow. In 5 categories all segments spent more. Last year, only all income segments spent more. In 2020, there were 4 categories in which all segments spent less on Services. Also, the $ changes from the winners are overwhelmingly larger than the negatives of the losers. The +$1.77B increase in Pet Services came from 74 of 82 demographic segments (90%) spending more. Last year it was 78% and in 2020, 88% spent less. The strong recovery has become a growth tsunami, +58% from 2020 and even +23% from 2019.

The usual winners have overwhelmingly returned with only 2 minor surprises

  • The South
  • Tie: 55>64 & 65>74

Virtually all of the Losers were also expected. Here are the surprises:

  • Gen X
  • Northeast

The older groups, specifically Baby Boomers are driving the 1st half lift. The 55>74 yr-olds are essentially all Boomers. Most Boomer CUs are 2 people, with no kids. The younger groups had the best performance in the 1st half of 2021 and 2020. It appears that the Baby Boomers have at least briefly “taken back the torch”.

Services $ are at a record high and growing. Let’s review how we got to this point and speculate on what comes next.

Except for the trauma caused by the Great Recession which hit Services in 2010>11, from 2000 to 2016 the Services segment had slow but consistent growth. The number of outlets also was increasing. Services were gaining in popularity and many retail pet stores were looking for a competitive edge over the growing pet product sales of online retailers. Afterall, you can buy product, but you can’t get your dog groomed on the internet. By 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020 and COVID. Although the consumer use of Services was becoming increasingly widespread, many Services outlets were deemed nonessential and were subject to pandemic restrictions and closures. Services Spending fell -$1.73B (-20.1%) in 2020 and nearly wiped out the big gain made in 2018.

In 2021, things opened up and Services spending began to rebound with a +$0.55B lift in the 1st half. This lift accelerated in the 2nd half and even the 1st half of 2022. Spending reached a new record high of $10.87B, with an annual growth rate of 7.3% since mid-yr 2019. That’s 43% higher than the 5.1% rate from 2009 to 2019. Pet Services have become an important option that is exercised by an increasing number of Pet Parents. However, much of the growth is increasingly being driven by higher incomes. There is some good news in this trend. Higher incomes are less negatively impacted by strong inflation. They buy the same amount, just pay more. This means that Services $ are likely to continue to grow.

U.S. PET SUPPLIES SPENDING $24.38B (↑$6.96B): MID-YR 2022 UPDATE

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In our analysis of Pet Food spending, we saw that spending had returned to strong normal growth after the up & down due to the pandemic. Supplies had a different pattern. At the beginning of 2020, Supplies Spending was down due to Tarifflation. The pandemic caused consumers to focus on needs so Supplies $ continued its steady decline from its 2018 peak reaching a low point below 2016. In 2021, that all changed. Supplies Prices had been steadily deflating and Consumers finally responded. In 2021 Pet Supplies spending took off, especially in the 2nd half. The increase slowed significantly in the 1st half of 2022. High inflation may have been a factor in the slowed increase but spending is still at a record $24.38B. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid 2022: $24.38B, ↑$6.96B (+40.0%) from Mid 2021.

The +$6.96B came from: Jul > Dec 2021: ↑$6.39B; Jan > Jun 2022↑$0.57B

The lift was huge and 92% of it came from the $6.39B increase in the 2nd half of 2021, by far the biggest YOY 6 month increase in history. Like Pet Food, Pet Supplies spending has been on a roller coaster ride, but the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends and the emotional response to the Pandemic. Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, when they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Before breaking the record in 2022, Pet Supplies prices reached their peak in September of 2009. Then they began deflating and in March 2018 were down -6.7% from 2009. Price inflation in this segment can retard sales, usually by reducing the frequency of purchase. While deflation generally drives Supplies spending up. A new “must have” product can “trump” both of these influencers. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

Recent history gives a perfect example of the Supplies roller coaster. In 2014 Supplies prices dropped sharply, while the movement to Super Premium Food was barely getting started – Supplies spending went up $2B. In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This combination caused Supplies $ to fall $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized then increased by $1B in the 2nd half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate through 2017. Food spending increased $4.61B in 2017 but this generally came from older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending.

In the 1st half of 2018 Pet Food spending slowed, +$0.25B. Supplies’ prices began inflating but were only +0.1% vs 2017. During this period Supplies Spending increased $1.23B. Inflation grew in the 2nd half of 2018 due to impending new tariffs in September. By June 2019 they were 3.4% higher than 2018. The impact of the tariffs on Supplies was very clear. Spending flattened in the 2nd half of 2018, then plummeted in the 1st half of 2019, -$2.09B. Prices stayed high for the rest of 2019 and spending fell an additional -$0.9B. In 2020 prices turned up again through March before plummeting,    -3.8% by June. However, due to the pandemic focus on “needs”, spending dropped an additional -$0.54B. The situation not only didn’t change in the 2nd half, it worsened as the $ fell an additional -$1.12B. However, 2021 brought a record resurgence as consumers “caught up” on the Supplies purchases that had been delayed due to the pandemic. Supplies spending increased +$8.65B in 2021, 20% above their 2018 peak. Sales passed $24B in  Mid-yr 2022 but the YOY 1st half increase slowed to +$0.57B. Inflation in Supplies took off at the beginning of 2022 so it may once again be a factor.

Here’s what Pet Supplies inflation looked like in Mid-2022:

  • Mid-Yr 22 vs 21: 5.6% • 2nd Half 21 vs 20: 3.9%       • 1st half 22 vs 21: 7.4%

You can see that the rate doubled in early 2022, which could have been a factor in the lower increase. However, 81% of the 40% spending increase was real. Inflation increased to 8.0% in the 2nd half of 2022 which made the 2022 annual YOY rate 7.7%. We’ll see if Pet Parents continue to spend at the same level despite record high prices.

Now, let’s take a closer look at the data, starting with two of the most popular demographic measures – age and income. The graphs that follow will show both the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves.

The first graph is for Income, which has been shown to be the single most important factor in increased Pet Spending, especially in Pet Supplies and both of the Service segments.

Here’s how you get the change for each half using the <$70K group as an example:

Mid-yr Total Spending Change: $7.12B – $6.90B = Up $0.22B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-21 ($6.90B) from Total 2021 ($7.53B) = Spending was up $0.63B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($7.53B) from Mid-22 ($7.13) = Spending was down $0.41B in 1st half of 2022.

  • You see that there are 2 basic patterns. The groups over $100K had increases in both halves, with the largest lift coming in the 2nd half of 2021. The under $100K also had spending increases during the 2nd half of 2021 but they were small. In the 1st half of 2022, spending for all lower income groups but $30>50K fell vs 2021. The drop was large enough for $50>70K that it had the only overall mid-year decrease in spending of any group.
  • It is very obvious from the chart that Supplies spending has moved to the higher incomes, especially the $150K> group. Over $100K has 31.4% of CUs but accounts for 58.7% of Supplies $. That’s a performance level of 186.7%. However, the $150K> is even stronger with 16.7% of CUs generating 40.3% of Supplies spending – performance: 241.3%. The highest performance for any group under $100K is from $70>100K at 85.2% but the averages were: <$100K = 60.2%; <$70K = 53.7%. The halfway point in Supplies spending is an income of $124K. That’s 36% higher than the level for Food. Pet Supplies spending is very much driven by income.

Now let’s look at Pet Supplies spending by Age Group.

  • There were 3 spending patterns. For 55> and 25>34 spending grew in both halves. The high-income 35>54 groups had a lift in the 2nd half of 21 then a small drop in 22. The <25 group had the only overall drop in spending.
  • The 2 biggest lifts came from 35>44, +$3.44B and 55>64, +$1.67B. Most of their increases came in the 2nd half of 21.
  • A big factor in the lower increase in 22 was that all but <25 had big spending increases in the 1st half of 21.
  • Supplies spending skews a little younger. The halfway point is 47 yrs old, a little younger than Food at 53 but in the middle of the highest income groups. Income is the biggest driver.

Now let’s look at what happened in Supplies spending at the start of 2022 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories.

  • Although the overall lift was small, the biggest increases are still radically larger than the biggest decreases.
  • The increase/decrease was mixed across the marketplace but 68% of segments spent more. There was no category in which all segments spent more. Last year there were 7. In 2020 there were 5 in which all segments spent less.
  • Many of the winners are the “usual suspects”, like $150K>, Mgrs/Professionals & 2 Earners but there are a couple of surprises – Associates degree & Center City.
  • In regard to the losers, $30>49K, Asians, 1 Earner, Singles and Renters are not unexpected but Gen X, 45>54 and those with BA/BS Degree are definitely surprises.
  • Perhaps the biggest trend is that the Baby Boomers are now catching up. The younger groups “bought in” earlier on Supplies. The wins by 55>64, Homeowners w/o Mtges, Married, w/child over 18 support the Boomers’ win.
  • The importance of high income in Supplies spending is reinforced. $150K> had the biggest 2022 lift of any segment as well as a $4B lift in the 2nd half of 2021. One way to overcome strong inflation is to make more money.

Since the Great Recession the Supplies segment has become commoditized and very sensitive to inflation/deflation. Plus, since most categories are discretionary, Supplies spending can be affected by spending changes in other segments, as Pet Parents trade $. In 2018, the Pet Industry was introduced  to a new “game changer” – outside influence. The FDA warning on grain free dog food caused a big decrease in food spending but the government also radically increased tariffs which drove Supplies prices up and spending down, a record $2.98B.

However, we weren’t done yet. That brought us to 2020 and a new, totally unexpected outside influence, the COVID pandemic. This affected all facets of society, including the Pet Industry. Consumers, including Pet Parents, focused on needs rather than wants. In the Pet Industry, this meant that their attention was drawn to Food and Veterinary Services. This led to a huge lift in Pet Food $ due to binge buying but also a big increase in Veterinary spending. The more discretionary segments, Supplies and Services, suffered. Services had an extra handicap. Many outlets were not considered essential, so they were subject to restrictions and closures. Supplies were still available, but many were considered optional by consumers so spending continued to decline throughout 2020. By yearend, $ had reached the lowest level since 2015. This all happened while prices continued to deflate. That brought us to 2021. The retail economy had largely recovered and spending patterns were returning to “normal”. This was also true in Pet Supplies. Pet Parents opened their wallets and  bought the Pet Supplies that they had been holding back on for a year. The result was the biggest annual increase in history. At the end of 2021 and throughout 2022, inflation came back into the picture with the highest YOY increases in history. The ongoing lift in Supplies spending slowed in the 1st half of 2022 but that spending was going against a record increase in 2021. There was some impact on lower incomes, but the high incomes remained strong. Inflation continued to grow in the 2nd half of 2022. We’ll see if its impact on spending increases.

Retail Channel Monthly $ Update – May Final & June Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Report for May and then go to the Advance Report for June. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the May Final. All were up from April, and all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the negatives were fewer than in April. However, Gas Stations are still really down vs 2019. The most significant change may be that Relevant Retail is now “really” up vs May 22. (All $ are Actual, Not Seasonally Adjusted)

The May Final is $2.8B more than the Advance Report. Specifically, Restaurants: +$1.4B; Auto: +$1.0B; Gas Stations: +$0.4B; Relevant Retail: N/C. Sales were up from April for all big groups and actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to drop monthly and YTD vs 2022. There are some real sales drops, especially vs 2021. Restaurants have the most growth and are the only group with all positives. To reiterate, the most significant data may be that real sales for Relevant Retail vs May 22 are positive. They have been down for 7 straight months. They are #1 in performance since 2019 but only 48% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in May in the Stacked Bar Graph Format

Overall– All 11 were up from April, but vs 22, 8 were up vs May 22 and 10 Ytd. 6 were “really” down monthly & Ytd. Vs 2021, 9 had increases but only 4 monthly & Ytd were real. Vs 2019, only Off/Gift/Souv & Disc Dept Strs were really down

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.7% since 2019. Prices for the Bldg/Matl group have inflated 20.8% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 21.5% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.3%, Real: 1.3%; Farm: 11.3%, Real: 5.0%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they have been very different in inflation. The gap is closing but the Grocery rate is still 32% higher than Drugs/Med products. Drug Stores are positive in all measurements and 73% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 9% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.6%;Drug Stores: +5.0%, Real: +3.7%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up from April and are actually & really positive vs 2022. However, they are actually & really negative vs 21. Prices are still deflating -0.9%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 60% of their 44.6% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.7%; Real: +6.1%.
  • Gen Mdse Stores – All were up vs April and $ stores had the biggest lift. Actual sales vs 22, 21 & 19 were also up for all but Disc Dept Strs vs May 22 & 21. In real sales, the only positive was in Ytd sales for $/Value Stores vs 22. Disc Dept Stores are the worst performer and are now really down -0.1% vs 2019. The other channels average 34% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.6%, Real: +2.6%; Disc. Dept.: +2.7%, Real: -0.01%
  • Office, Gift & Souvenir Stores – Actual sales are up 10.9% from April but down from May 22. They were up in all other measurements vs 22, 21 & 19. Their real sales growth is down monthly vs 22 & Ytd vs 19. All other real numbers are positive. Their recovery started late but they are making slow progress. Avg Growth Rate: +0.9%, Real: -1.8%
  • Internet/Mail Order – Sales are up from April and above $100B again at $105.3B – another monthly record. All measurements are positive, but their growth is only 43% of their average since 2019. However, 79% of their 97% growth since 2019 is real. Avg Growth: +18.5%, Real: +15.4%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in Mar>May. (May was +18%) Ytd Real sales are down vs 22, but all other measurements are positive. They are still the % increase leaders vs 2021 and 71% of their 55.2% growth since 2019 is real. Average 19>23 Growth: +11.6%, Real: +8.7%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 8 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 5 vs 2022 & 4 vs 2021. Inflation has impacted sales increases. May was a strong month but the lift was still 30% less than in Jan & Feb. The impact is very visible at the retail channel level. Inflation has continued to slow. Let’s look at the impact on the Advance Retail $ales for June.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March, fell in April, grew again in May, then dropped in June. Except for a decrease by Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some stability in that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are again positive, including monthly sales vs 22 for Relevant Retail. The biggest change is that the lift vs 2022 is notably smaller, especially for Relevant & Total Retail.

Overall – Inflation Reality – Total, Auto & Gas prices all deflated. For Relevant Retail, the rate was slightly below the sales lift. For Restaurants, inflation remains high, +7.6% but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail vs last year have been positive for 2 straight months after 7 consecutive negatives. However, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in Mar, fell in Apr, grew in May, then fell in June. Inflation has become deflation, but sales growth is still low. Sales are up 1.7% vs last year. That’s only 21% of their average 19>23 growth. Also, real sales are down monthly and Ytd vs 21 and only 36% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still clearly see its cumulative impact. Avg 2019>23 Growth: +8.0%, Real: +3.1%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 7.6% in June from 8.2% last month but is still +15.7% vs 21 and +21.2% vs 19. 39.6% of their 40.9% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.8%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, then fell in June. Again, only monthly & Ytd real sales vs 21 are negative. Prices are -0.7% vs 22 and are down -1.4% Ytd. 10% of 19>23 growth is real. Avg 2019>23 Growth: +6.9%, Real: +0.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>Jun, -14.0% Ytd vs 22. However, prices are still +17.5% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Look at the rates. Real sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.5%, Real: -1.0%. The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in June, but all actual sales are up vs 22, 21 & 19. Real sales are down vs June 21 & Ytd vs 22 & 21. Monthly Real sales vs last year have been positive for 2 straight months after 7 negatives in a row. 49% of their 19>23 $ are real – #1 in performance. Avg 2019>23 Growth is: +8.4%, Real: +4.3%. This big group is where America shops. The fact that real sales have been positive for 2 consecutive months gives us hope.

Inflation is slowing but the cumulative impact is still there. Sales increases are also slowing, but the fact that 55% of all real sales numbers vs 22 & 21 are positive again is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a continued drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive for 2 straight months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at June by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.4%, Real: +4.3%. Only 2 channels were up from May but 7 were up vs 22 & 21. Only 4 had a “real” increase vs 22 and 5 vs 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are down from May and for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.3%, Real: -2.4%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are down vs May but up in all other measurements. Their real sales are down in all measurements but vs June 21 & Ytd vs 19. Only 34% of their 27.5% 19>23 lift is real – the impact of inflation. Avg Growth: +6.3%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from May but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 7.6% of the growth since 2019 is real. Avg Growth: +6.3%, Real: +0.5%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from May but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 74% of their 23.4% growth from 2019 is real. Avg 2019>23 Growth: +5.4%, Real: +4.0%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. $ales are down from May but up vs 22, 21 & 19. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 64% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.8%, Real:+2.5%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are down from May and in all other measurements but Ytd vs 2019. Their real sales are again all down, even vs 2019. Avg 2019>23 Growth: +4.0%, Real: -0.2%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up from May but down in all measurements but vs Jun 22 & Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.6%, Real: +2.5%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 8.8%. Sales are down -8.1% from May which caused them to be all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +8.1%, Real: +2.0%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are up from May but only positive Ytd vs 22 & 19. Real sales have the same pattern. Prices actually deflated to -0.1% vs June 22 and their inflation rate has been much lower than most groups so 64.7% of their 30.6% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are -1.8% vs May but positive in all other measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 67% of their 44.8% 19>23 growth and even 53% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.7%, Real: 6.8%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from May but all other measurements are positive. 78% of their 88.7% growth since 2019 is real. Their Avg Growth: +17.2%, Real: +14.0%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Jun which should help the Retail Situation. Sales were down from May for all big groups and 9 smaller channels. Inflation continues to slow in most channels and even deflate in a few. However, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 2 straight months but are still negative for 7 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care, Electronics/Appliances  and Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – June Update: Again below double digits, +9.6% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. June prices grew 0.3% from May and the CPI was still +3.0% vs 2022, but down from +4.0% 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 +4.7%, with 4 consecutive months below 10%. 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% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% 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 2022 and is now +9.6% in June, more than 3 times the national rate of 3.0%. 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 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from June 2021 to June 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see 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. This will give you some key waypoints. In June, Pet Products prices are down from May, but they increased in both Service segments.

In June 2021, the national CPI was +5.7% and Pet prices were +2.1%. 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 Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>June, prices grew every month except for 2 dips by Supplies, 1 dip for the other segments and a June dip by Total Pet. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since November 2022.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Jun but 36% of the overall 18.7% increase in the 42 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21, when they turned up. There was a sharp lift in Dec 2021, and it continued until the dip in June. 93% of the 23.1% increase has occurred 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 Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, another new record. They fell in March, set a record in May, then fell in June.
  • Pet Services– Normally inflation is 2+%. 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 Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up slightly in June, +0.04%.
  • 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 Oct & Dec dips they have stayed above the National CPI since July. In 2023 prices grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May, then fell in June. Except for 5 individual monthly dips, including 2 in June, prices in all segments have increased monthly in 2023. It has been ahead of the cumulative U.S. CPI since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for June and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation dropped below double digits to 9.6% in June but is now over 3 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

  • U.S. CPI– Prices are +0.3% from May. The YOY increase is down to +3.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 50% higher than the target. However, a 12th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.3%, 64% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.2% vs May and +12.1% vs June 2022. They are also 2.5 times the Food at Home inflation rate – not good news! The YOY increase of 12.1% is being measured against a time when prices were 9.8% above the 2019 level, but that increase is still an incredible 4.3 times the pre-pandemic 2.8% increase from 2018 to 2019. The 2021>2023 inflation surge generated 99% of the total 23.9% inflation since 2019.
  • Food at Home – Prices are down -0.1% from May. The monthly YOY increase is 4.7%, down from 5.8% in May and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.2% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 69% 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 fell -0.5% from May, and they still have the lowest increase since 2019. They also fell again to 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. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June.
  • Veterinary Services – Prices are up 0.6% from They are +11.4% from 2022 and remain in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 30.2% compared to Food at home at 25.2%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64% of the 4 years’ worth of inflation occurred in the 2 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 20>21. In May prices fell -0.04% from May and are -0.8% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 35% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. June 23 prices were up +0.04% from May and +6.3% vs 2022, which is up from 5.6% last month but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 61% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.4% from May and +5.0% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 54% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is only 9% higher than the 21>22 rate, but 3 times the National CPI and +9.6% is the highest June rate in history. Vs May, Product Prices fell while Services increased so Total Pet fell -0.2%. Note: A May>June decrease has happened in 13 of the last 26 years so it is not that unusual. Food & Veterinary are still the Petflation leaders and have the biggest increases over 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

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.0%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 41% from 21>22 but is still 11% more than the average increase from 2019>2023, and 2.3 times the average annual increase from 2018>2021. 72% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 94.3% 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 61%. You can see the impact of supply chain issues on the Grocery category as 76% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down slightly at 5.2% as prices fell in June. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 115% of this increase happened from 2021>23. Prices are up 13.0% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they have only the 4th highest rate since 2021. At +6.4%, 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 been deflating and are now at a rate actually 64% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 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>Apr. The January 2023 increase of 8.4% was the largest in history. YTD June again slipped a little to 7.0%. Growing demand with decreased availability is 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 22, prices turned up again. The YTD rate is 6% below the peaks in 21 & 22 but is 82% more than 2018>19. Consumers are paying 21% 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 grew 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 continued to climb until June. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in June. The Services segments have also had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.2%, double the National rate. In May 22 it was 5.8% below the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 10.3% in May to 9.6% in June. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 9 of the last 11 months have been over 10% and the current rate is still 6 times more than the 1.6% average rate from 2010>2021. It’s also more than triple the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have 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 the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 9.6% from 2022 but they are up 19.2% from 2021 and 23.3% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need it again.

 

U.S. PET FOOD SPENDING $36.35B (↑$4.79B): MID-YEAR 2022 UPDATE

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The pandemic had a huge impact on consumers, including spending on Pet Food. We’ll do a more detailed historical review of recent years but at Mid-year in 2022 things finally seem to be returning to a more normal situation. Pet Food Spending for the 12 months ending June 30, 2022 was up $4.79B (+15.2%) from a year ago. Let’s put that into proper perspective. In pre-pandemic, Mid-2019 Pet Food spending was $28.90B. That means that the average annual growth rate from 2019>22 is +7.9%. This is 42% better than the average growth rate of +5.6% from 1984 to 2019. This industry segment is doing well. Of course, we’re starting to face what may be a new challenge – radically high inflation in Pet Food prices. Here’s what it was in mid-year 2022:

  • Mid-yr 22 vs 21: +4.0%
  • 2nd Half 21 vs 20: +1.6%
  • 1st Half 22 vs 21: +6.5%

You can see that the inflation rate in early 2022 was over 4 times higher than the rate in late 2021. It hit 10+% in June 2022 and continued at historic high levels. Prices in the 2nd half of 2022 were 14% higher than in 2021. Traditionally, “normal” inflation increases have had little impact on Pet Food spending. However, these increases are historic. We’ll get a better indication of their current impact when the 2022 yearend Pet Food spending numbers are released  in early September. I just wanted you to be aware of the situation as we review the mid-year data.

If inflation was 4.0% for Mid-Yr 2022, then 73.7% of the increase in Pet Food spending was real. Good, but not great. We’ll see what the situation looks like at yearend. Also, 59% of the $4.79B lift occurred when inflation was lower.

Now, let’s get started with our Pet Food spending update for Mid-Year 2022. As we stated earlier, Pet Food (& Treat) Annual Spending was $36.35B, up +$4.79B (+15.2%). The following charts and observations were prepared from calculations based upon data from the current CEX report and earlier ones. The first chart will help put the current numbers into historical perspective and truly show you the roller coaster ride that continues in Pet Food Spending.

Here are the current numbers:

Mid-Yr 2022: $36.39B; ↑$4.79B (+15.2%) from Mid-Yr 2021. The net gain of $4.79B came from

◦  Jul>Dec 2021: Up $2.85B from 2020.          ◦  Jan>Jun 2022: Up $1.94B from 2021.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, generally with 2 years up, followed by a flat or even declining year. This up and down “ride” was primarily driven by a succession of Food trends like Made in the USA, Natural and Super Premium”. The 2 yrs up then 1 yr flat/down pattern has been broken on a couple of occasions due to outside influences – the FDA grain free warning in 2018 and now the COVID pandemic in 2020. We may see another major influence on spending – recent skyrocketing inflation. The timing may be affected  but the Pet Food spending rollercoaster ride is likely to continue.

2013 was definitely a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013. The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food. As it turns out, 2014 brought out yet another new factor in Pet Food spending.

For over 30 years Baby Boomers were the leaders in Pet Food, both in spending and in adopting new products. Even in 2022, they still spend the most, but it turns out that the 25>34 yr-old Millennials led the movement to Super Premium in late 2014. The older groups, especially Boomers followed in 2015 and spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out that they were leading the way in another element of the trend to Super Premium – value shopping. The Boomers once again followed their lead and spending fell -$2.99B in 2016. For consumers, the Super Premium upgrade movement consisted of 3 stages:

  1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.
  2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.
  3. Value Shop – After commitment, the “driver” is to find a cheaper price! – The Internet, Mass Market, Private label

This brought us to 2017. Time for a new “must have” trend. That didn’t happen but the competitive pricing situation brought about another change. Recent food trends have been driven by the higher income and higher education demographics. However, the “value” of Super Premium was established and now more “available”. Blue Collar workers led a new wave of spending, +$4.6B, as Super Premium more deeply penetrated the market. After the big lift in 2017, 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts immediately rolled back their upgrade and spending fell -$2.51B. This 2018 decrease broke a 20 year spending pattern. In the 1st half of 2019, Pet Food spending remained stable at the new lower level. In the second half of 2019 we started to see a recovery from the overreaction to the FDA warning and spending increased by $2.3B. Then came 2020. The recovery was continuing but a new outside influence was added which had a massive impact on U.S. consumers – the COVID-19 pandemic. In March nonessential businesses were closed. This also produced a wave of panic buying in some truly essential product categories. In the Pet Industry there is only 1 truly essential category – Pet Food. Coupled with the FDA “recovery” and the ongoing movement to Super Premium, this produced an incredible $6.76B lift in Pet Food Spending in the 1st half of 2020. Spending fell in the 2nd half of 2020 and plummeted in the 1st half of 2021. Pet Parents didn’t binge again, and some began using up the stockpile that they panic bought in the early days of COVID. In the 2nd half of 2021, the up/down impact of COVID was essentially over. Pet Parents were still committed to their children’s health which included Super Premium Foods and Medical Supplements, often in treat form. The internet also made this quality choice accessible to more households so Pet Food spending increased both in the 2nd half of 21 and the 1st half of 22. 59% of the lift occurred in the 2nd half of 2021 when inflation was still low. Was that a factor?

Let’s look at Pet Food spending by the 2 most popular demographic measures – income & age group. They both show the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending and its influence continues to grow.

Here’s how you get the change for each half of the 21>22 mid-yr numbers using the over $100K group as an example:

$100K> Mid-yr Total Spending Change: $16.36B – $13.77B = Up $2.59B (green outline = increase; red outline = decrease)

    • 2nd half of 2021: Subtract Mid-21 ($13.77) from Total 2021 ($15.51B) = Spending was up $1.74B in 2nd half of 2021.
    • 1st half of 2022: Subtract Total 2021 ($15.51B) from Mid-22 ($16.36B) = Spending was up $0.85B in 1st half of 2022.
  • All increased spending for the year but there were 3 different patterns in the individual groups. #1. $150K> & $50>69K spent more in both halves. #2. <$30K & $70>99K spent less in the 1st half of 2022. #3. $30>49K & $100>149K spent less in the 2nd half of 2021. All but #2 have a high/low income mix. #2 has the lowest income and the middle income groups. Both are very price sensitive. Note: Their spending dropped during the highest inflation.
  • Perhaps the most obvious fact is the continued spending disparity due to income. Back in 2014, prior to the big lift due to Super Premium, $70K was the “halfway point” in Pet Food spending. The under $70K group accounted for 66.7% of CUs and 51.1% of Pet Food spending. They lost the lead in 2015 as $70K> spent 50.8% of Pet Food $. In 2020, the binge buying of Pet Food by $100>150K pushed the $100K> group to the top at 55.1%. Then the big drop in 2021 flipped $70K> back into the lead at 60.8%. They currently have a share of 62.0%. The halfway point in Pet Food spending is below $100K but still high at $91K, the 2nd highest in history.
  • < $70K > The Pet Food spending patterns for both big groups are similar with increases in both halves. However, in a bit of a surprise, the Fall 2021 lift is larger for $70K> while the early 2022 lift is larger for <$70K. Higher Inflation appears to not have grossly affected these big groups.
  • < $100K > The spending patterns of these 2 groups closely mirrors the Under/Over $70K pattern. The Fall 2021 spending lift for the $100K> group was 100% driven by $150> CUs. The Spring 2022 lift for <$100K was totally driven by CUs with an income of $30>69K. Again, not the result that you would expect based upon higher inflation.
  • <$30K – With a lift in the Fall and a drop in the Spring, spending for this lowest income group essentially remained stable vs last year. They may have been impacted by rising prices in 2022.
  • $30>49K – This low-income group also includes many Retirees. They are growing in number and are committed to their pets. However, their spending behavior timing often lags behind other groups which may explain the Spring lift.
  • $50>69K – This low income group was hit hard by the pandemic. With steady growth in both halves, they have finally surpassed their Pet Food spending in pre-pandemic 2019.
  • $70>99K –This middle-income group was the most negatively affected by the pandemic. However, they fully recovered in 2021. Then spending flattened in early 2022. They are very value conscious. We’ll see if the skyrocketing inflation in the 2nd half of 2022 affects their Pet Food spending.
  • $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. This group led the way in Pet Food binge buying and the subsequent drop. Sales grew slightly in early 2022 so they remain above 2019 $.
  • $150K > Their Pet Food spending also fell in 2020, likely due to value shopping on the internet. They came back strong in 2021, 10% above 2019. $ are up slightly in 2022. Strong inflation and the resulting higher prices will likely cause them to spend more.

Now let’s look at Pet Food spending by Age Group.

  • 25>34 yr olds had a steady decline. All other groups spent more but 75> had a spending dip in early 2022.
  • <25 – Their spending had a huge increase and they are back above $1B. It’s likely that more moved out of their parents’ home and many added pets to their household.
  • 25>34 – A -$1.35B drop after last year’s $1.77B increase. This group, especially those with families, are under a lot of financial pressure. Overall inflation likely caused many CUs to cut back on spending and even rescind Food upgrades.
  • 35 > 44 – Spending fell in 2020 likely because they turned to the internet. They are 2nd in income and their spending has smaller fluctuations. Their biggest lift occurred in the 1st half of 2022 and they exceeded $6B for the 1st time.
  • 45 > 54 and – They have the highest income, so their annual up/down spending pattern is not expected. Their Pet Food $ dropped throughout 2020 but it has increased in every half since then. However, it is still below the $7.09B peak in 2019. Value Shopping & downgrades/upgrades are all likely to be factors in a complicated pattern.
  • 55>64 – This group is still mostly Boomers, the most emotional Pet Parents. In 2020 they led the way in Pet Food binge buying. They also had the biggest 2021 drop. With growth in both halves, including a $0.77B lift in 2022 they have now returned to their pre-pandemic 2019 spending level.
  • 65 > 74 – This group is all Boomers but with lower income. Spending grew in both halves. They are committed to their pets. Even though the members change, they are the only age group with steady annual growth since 2016.
  • 75> – COVID had little impact on spending. In 2021 they upgraded, +$1.76B. Spending fell slightly in the 1st half of 22.

That gives us the “big picture” for our 2022 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2022. We’ll compare it to the 1st half of 2021 and document the biggest changes since then.

  • The biggest increases are much larger than the biggest decreases in 10 categories. They are almost equal in Age, but the drop is larger in CU Composition. In Housing and CU Size, all segments spent more in 2022 than in 2021.
  • There are a number of usual winners, Managers, White, Not Hisp., Boomers, 55>64, Big Suburbs, Homeowners w/Mtges and 3+ Earners. There are also some surprises like $30>49K, 2+ Unmarried Adults and HS Grads.
  • When we look at the losers, we also see some familiar names, <$30K, Born <1946, 1 Earner Single and Center City. However, there are 2 big surprises – Adv. College Deg. and 25>34 yr olds.
  • Pet Food spending in the 1st half of 2022 was $1.94B ahead of the 1st half of 2021 but $3.44B ahead of 2019. In fact, 68 of 82 demographic segments (83%) spent more in 2022 than in 2021. The pandemic turmoil appears to be over.

The spending lift was relatively large in the 1st half, but not unexpected, after the huge drop in Pet Food $ in the 1st half of 2021 following the buying binge in 2020. It appears that the steep pandemic roller coaster may have ended in 2021 and we might be back on a more normal path of consistent growth. Pet Food spending in mid-yr 2022 was $36.35B. This is $1.57B below the binge peak of $37.96B in mid-2020 but $7.49B more than the $28.90 in pre-pandemic mid-yr 2019. If we ignore the pandemic turmoil, then Pet Food spending has grown 25.9% in 3 years. That’s an annual growth rate of +7.9%, which is 41% higher than the +5.6% rate from 1984 to 2019. That’s real proof that the Pet Food segment is back and doing even better than usual. Unfortunately, we may be facing a new challenge – runaway inflation. It started slowly at the end of 2021, then continued to grow in 2022, hitting 10+% in June and has stayed in double digits. Past periods of Pet Food inflation just caused Pet Parents to spend more. Pets must have food. However, this price increase is at record levels. We should note that the pandemic is also a factor in inflation because supply chain issues related to COVID had a big impact on prices. Overall inflation has lessened but there has been little improvement in Pet Food. All pet spending has been moving towards higher incomes. Households with a lot of financial pressure could cut back on more discretionary pet spending, reduce purchase frequency, and even downgrade their pet food. We have seen little evidence of a negative impact on Pet Food in early 2022. We’ll see what happens in the 2nd half of 2022 when inflation took off. We’ll get that data in September.

Retail Channel Monthly $ Update – April Final & May Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for April and then go to the Advance Report for May. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the April Final. All were down from last month, and driven by drops in Gas Stations and Auto, Total Retail was down vs April 2022. When you consider inflation, the negatives become widespread. Gas Stations are still really down vs 2019. The biggest concern is that Relevant Retail was down in all “real” measurements vs 21 & 22. (All $ are Actual, Not Seasonally Adjusted)

The April Final is $3.0B less than the Advance Report. Specifically, Restaurants: -$0.4B; Auto:-$0. 1B; Gas Stations: N/C; Relevant Retail: -$2.5B. Sales were down from March and driven by drops in Auto & Gas Stations, consumers spent slightly less vs last year. However, Total Retail, Restaurants & Relevant Retail were positive in all other actual Sales numbers vs 22, 21 & 19. Auto was “really” down vs 21 and Gas Stations are really down Ytd vs 21 & 19. The most significant data may be that real sales for Relevant Retail vs 2022 have now been down for 12 of the last 13 months. In April all real numbers vs 22 & 21 are negative. They are #1 in performance since 2019 but only 49% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in April in the Stacked Bar Graph Format

Overall– 6 of 11 were down from Mar, but vs 22, 7 were up vs Apr and 10 Ytd. 8 were “really” down monthly & 6 Ytd. Vs 2021, 9 had increases but only 2 monthly were real and 4 Ytd. Vs 2019, Office/Gift/Souvenir was the only real negative.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.4% since 2019. Prices for the Bldg/Matl group have inflated 23.1% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month vs 22 & 21 & Ytd vs 22 while Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 21.5% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.4%, Real: 1.4%; Farm: 10.7%, Real: 4.5%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is still 78% higher than for Drugs/Med products. Drug Stores are positive in all but real $ vs April 21 and 74% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 10% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.7%; Drug Stores: +4.9%, Real: +3.7%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down from March and are now negative vs 22 & 21 except for actual and real YTD $ vs 22. Prices are currently deflating -0.04%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 59% of their 44.6% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.7%; Real: +6.1%.
  • Gen Mdse Stores – All but Disc Dept Strs were up vs March. In actual sales, they also had the only negative – vs April 22. In real sales, the only positives were in monthly & Ytd sales for $/Value Stores vs 2022. Disc Dept Stores are by far the worst performer with only 12% real growth since 2019. The other channels average 35%. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.5%, Real: +2.5%; Disc. Dept.: +3.1%, Real: +0.4%
  • Office, Gift & Souvenir Stores – Actual sales are down from March but up in all measurements vs 2022, 2021 & 2019. However, their real sales growth is still down monthly vs 2022 & 2021 and Ytd vs 2019. Their recovery didn’t start until the spring of 2021, but they are making progress. Avg Growth Rate: +1.3%, Real: -1.3%
  • Internet/Mail Order – Sales are up +6.2% from March but below $100B at $97.B – still another monthly record. All measurements are positive, but their growth is only 33% of their average since 2019. However, 80% of their 99% growth since 2019 is real. Avg Growth: +18.7%, Real: +15.6%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in Mar>Apr. Real sales are down vs April & Ytd 2022, but all other measurements are positive. They are still the % increase leaders vs 2021 and 72% of their 58.3% growth since 2019 is real. Average 19>23 Growth: +12.2%, Real: +9.2%. They remain 2nd in growth since 2019 to the internet. Pet Stores are certainly contributing.

Even as it slows, inflation remains an important factor in Retail. In actual $, 7 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 3 vs 2022 & 2 vs 2021. Inflation is slowing but not as fast as sales increases. Inflation has increased its impact at the retail channel level. Recent data indicates that Inflation continues to slow. Let’s look at the impact on the Advance Retail $ales for May.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March, fell in April, then grew again in May. Except for a drop by Gas Stations, all actual sales are positive. The biggest change is that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are positive. Last month there were only 6. This clearly shows that the slowing inflation rate is starting to have an impact.

Overall – Inflation Reality – The May $ increase rate was low but below the inflation rate for all but Restaurants. At 8.2%, their inflation remains high, but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail are positive again. That’s 2 of the last 4 months. However, they have been down in 12 of the last 14 months so their Ytd Real sales are still down vs 2022 & 2021. They have a ways to go to catch up.

Total Retail – Since June 2020, every month but April 2023 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in Mar, fell in Apr, then grew in May. Inflation is slowing but sales growth remains low. Sales are up 2.8% vs last year. That’s only 35% of their average growth since 2019. Also, real sales are down monthly and Ytd vs 21 and only 35% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but this clearly shows its cumulative impact. Avg 2019>23 Growth: +7.9%, Real: +3.0%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 8.2% in May from 8.4% last month but is still +16.1% vs 21 and +20.9% vs 19. 40.2% of their 40.8% growth since 19 is real but they fell to 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.9%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, then grew in May. Now, only monthly & Ytd real sales vs 21 are negative. Prices are +0.1% vs May 22 but are still deflated Ytd. Avg 2019>23 Growth: +6.7%, Real: +0.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>May, -10.9% Ytd vs 22. However, prices are still +19.4% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Look at the rates. Real sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.5%, Real: -1.2%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020 and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops. Sales in March turned up, fell in April, then rose in May. All actual sales are up vs 22, 21 & 19 and only Ytd real sales are down vs 22 & 21. Monthly Real sales vs last year have been positive in 2 of the last 4 months but negative  in 12 of the last 14 months. 48% of their 19>23 $ are real – #1 in performance. Their Avg 2019>23 Growth is: +8.4%, Real: +4.3%. This huge group is where America shops. The fact that real sales have been up in 2 of the last 4 months gives us hope.

Inflation is slowing but the impact is still there. Sales increases are slow, but the fact that 55% of all real sales numbers vs 22 & 21 are now positive is a good sign. Restaurants are still doing well and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Only Ytd real sales vs 22 & 21 are negative. This shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive in 2 of the last 4 months. This is not the end of the crisis, but it could be the beginning of a turnaround.

Here’s a more detailed look at May by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.4%, Real: +4.3%. All channels were up from April but only 6 were up vs 22 & 8 vs 21. Only 5 had a “real” increase vs 22 and 4 vs 21. The negative impact of inflation is visible in both actual & real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are up from April but down for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.4%, Real: -2.3%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up from April and in all other measurements. However, their real sales are down in all measurements but Ytd vs 19. Only 34% of their 27.3% 19>23 lift is real – the impact of inflation. Avg Growth: +6.2%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are up from April and in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 9.0% of the growth since 2019 is real. Avg Growth: +6.3%, Real: +0.6%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are up from April and in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 74% of their 22.2% growth from 2019 is real. Avg 2019>23 Growth: +5.1%, Real: +3.9%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Actual Sales are up from April and only down vs May 22. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 63% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.7%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are up from April but down in all other measurements but Ytd vs 2019. Their real sales are now all down, even vs 2019. Avg 2019>23 Growth: +4.1%, Real: -0.1%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up vs April but down in all measurements but Ytd vs 19. However, deflation has caused real sales to be up in all measurements. Consumers bought more but paid less. Avg 2019>23 Growth: +0.4%, Real: +2.2%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation slowed and Sales are up for the 3rd consecutive month. The only negative is Ytd vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +8.0%, Real: +1.9%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are up from April and positive in all other measurements. Real sales are only down monthly and Ytd vs 21. Their inflation is lower than most groups so 64.5% of their 30.7% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up 12.5% from April and positive in all measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 67% of their 43.9% 19>23 growth and even 53% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.5%, Real: 6.6%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are up from April and all measurements are positive. 78% of their 87.6% growth since 2019 is real. Their Avg Growth: +17.0%, Real: +13.9%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>May which should improve the Retail Situation. Sales were up from April for all big groups and all 11 smaller channels. While Inflation continues to slow in most channels, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real sales for Relevant Retail are now positive vs May 2022 but are still negative for 5 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore, Health Care and smaller channels like Sporting Goods & Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – May Update: Prices are still high, +10.3% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. May prices grew 0.3% from April and the CPI was still up +4.0% vs 2022, but down from +4.9% 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 +5.8%, with 3 consecutive months below 10%. 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% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% 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 2022 and is now +10.3% in May, more than 2½ times the national rate of 4.0%. 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 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from May 2021 to May 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see 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. This will give you some key waypoints. In May, Pet Products prices are up from April, but they fell in both Service segments.

In May 2021, the national CPI was +4.8% and Pet prices were +2.2%. 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 Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>May, Food prices grew every month. Prices in the other segments also grew except for 1 monthly dip for each. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since Nov.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>May but 38% of the overall 18.3% increase in the 41 months since December 2019 happened in the 6 months from January>June 2022.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 2020 > Sept 2021, when they turned up. There was a sharp lift in Dec 2021, and it has continued. 93% of the 23.3% increase has occurred 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 Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, setting a new record. In March, they fell but they set a new record in May.
  • Pet Services– Normally inflation is 2+%. 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 Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April and prices fell -0.3% in May. Services still have the 3rd highest Petflation rate.
  • 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 Oct & Dec dips they have stayed above the National CPI since July. In 2023 prices grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December but has turned up again Jan>May. Except for 3 individual monthly dips, prices in all segments have consistently increased in 2023. It has been ahead of the cumulative U.S. CPI on our 2019>23 chart since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for May and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation slowed slightly to 10.3% in May but is now 2½  times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.3% vs April and were up 4.0% vs May 2022. The Grocery increase is down again, to +5.8% from +7.1%, but is still a big negative. Inflation often slows in May so it’s not surprising that 3 of 9 categories had decreased prices from last month, compared to 1 in April. Of the 6 categories with increases, only 2 were over 0.3%, both from the Pet Industry – Supplies: 0.9%; Pet Food: 0.8%. The overall national YOY monthly inflation rate for May is down from April and is again much lower than the 21>22 rate. All but 3 categories – Pet Food, Veterinary and Total Pet have a similar pattern. In these 3 the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019. 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. Of Note: These are all service expenditures, not products. The Pet Supplies Segment has a unique situation. The 21>23 inflation surge provided 116% of the overall inflation since 2019. This happened because Pet Supplies prices strongly deflated in 20>21.

  • U.S. CPI– Prices are +0.3% from April. The YOY increase is down to +4.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 2 times higher than the target. However, a 11th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is still 13.0%, 69% of total inflation since 2019. How many households “broke even” by increasing their income by 13% in 2 years?
  • Pet Food– Prices are +0.8% vs April and 13.8% vs May 2022. They are also more than double the Food at Home inflation rate – not good news! The YOY increase of 13.8% is being measured against a time when prices were 8.4% above the 2019 level, but that increase is still an incredible 4.9 times the pre-pandemic 2.8% increase from 2018 to 2019. The 2021>2023 inflation surge generated 99% of the total 24.3% inflation since 2019.
  • Food at Home – Prices are up +0.1% from April. The monthly YOY increase is 5.8%, down from 7.1% in April and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 24.9% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 74% 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 increased +0.9% from April, but they still have the lowest increase since 2019. However, they did move up to 3rd 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. 3 straight months of increases pushed them to a new record high in February. but prices fell in March. They bounced back in Apr>May and set a new record.
  • Veterinary Services – Prices are -0.2% from April. They are +11.0% from 2022 and remain in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 29.8% compared to Food at home at 24.9%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64% of the 4 years’ worth of inflation occurred in the 2 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 20>21. In May prices fell -0.1% from April and are -0.1% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 33% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. May 23 prices were down -0.3% from April and +5.6% vs 2022, which is down from 6.4% last month and 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 62% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.2% from Apr. and +4.9% from 2022, only the 3rd highest rate since 2019. Inflation had a significant surge in 20>21 so just 54% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is 27% higher than the 21>22 rate, 2.5 times the National CPI and +10.3% is the highest May rate in history. Vs April, Product Prices increased while Services fell so Total Pet was only up 0.3%. Note: An Apr>May increase has happened in 21 of the last 26 years. Food & Veterinary are the leaders and are the only segments in which the 22>23 inflation rate 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.

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is essentially tied with 21>22. The Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.1%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 35% from 21>22 but is still 20% more than the average increase from 2019>2023, and over 2½ times the average annual increase from 2018>2021. 74% of the 18.8% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 93.3% 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 60%. You can see the impact of supply chain issues on the Grocery category as 77% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is up slightly at 5.5% and prices hit a new record high in May. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 113% of this increase happened from 2021>23. Prices are up 12.8% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they are only the 4th highest since 2021. At +6.3%, 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 48% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 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>Apr. The January increase of 8.4% was the largest in history. YTD May has slipped a little to 7.2%. Growing demand with decreased availability is 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 22, prices turned up again. The YTD rate is 9% below the 2020>21 peak but is 76% more than 2018>19. Consumers are paying 20% 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 Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar then rose again in Apr>May. The Services segments have had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.3%, 94.3% more than the National rate. In May 22 it was 5.8% less than the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 10.4% in April to 10.3% in May. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 9 of the last 10 months have been over 10%. We are back in double digits. The current rate is 6.4 times more than the 1.6% 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 will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have 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. This recognized spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 10.3% from 2022 but they are up 19.3% from 2021 and 23.6% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need a repeat.

Retail Channel $ Update – March Final & April Advance

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While inflation continues to slow, its cumulative effect on consumer spending is now being felt. The rate of sales increases has slowed even more than inflation. This has caused a drop in the amount of product sold in many channels. Some have even turned negative in the actual $ sold vs previous years. A recession is the biggest fear, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin with the Final Report for March and then go to the Advance Report for April. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the March Final. All were up from last month and only Gas Stations and Auto had any decreases vs 21 or 22. When you consider inflation, Auto was down vs 21 and Gas Stations vs 19 & 21. Total Retail & Relevant retail were really down vs Apr 21 but Relevant Retail was also down for the month & Ytd vs 2022. (All $ are Actual, Not Seasonally Adjusted)

The March Final is $6.0B less than the Advance Report. Specifically, Restaurants: -$4.6B; Gas Stations: -$0.7B; Auto: +0.9B; Relevant Retail: -$1.6B. Sales were up from February as expected and consumers continue to spend more vs last year in all but Gas Stations. In fact, Total Retail, Restaurants & Relevant Retail were positive in all actual Sales measurements vs 22, 21 & 19. Auto was “really” down vs 21 and Gas Stations are really down Ytd vs 21 & 19. The most significant change is that the real sales for Relevant Retail vs 2022 turned negative again. It has now been down for 11 of the last 12 months. They are still in 1st place in performance since 2019 but only 50% of their growth is real.

Now, let’s see how some Key Pet Relevant channels did in March in the Stacked Bar Graph Format

Overall– All 11 were up from Feb, but vs 22, 10 were up vs Mar and Ytd. 8 were “really” down monthly & 6 Ytd. Vs 2021, 7 had increases but only 3 monthly were real and 4 Ytd. Vs 2019, Office/Gift/Souvenir was the only real negative.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 38.7% since 2019. Prices for the Bldg/Matl group have inflated 23.4% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month vs 22 & 21 & Ytd vs 22. Farm Stores are a little better, only down vs March 2021. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 22.1% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 8.2%, Real: 2.2%; Farm: 10.6%, Real: 4.5%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is over 2 times higher than for Drugs/Med products. Drug Stores are positive in all numbers vs 22, 21 & 19 and 75% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 10% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.7%; Drug Stores: +5.1%, Real: +3.8%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up 30% from February, slightly positive vs 2022 but down vs 2021. Real sales are only positive Ytd vs 2022. Their current inflation rate is 1.1%, a big drop from +5.4% in 21>22 and +6.5% in 20>21. The result is that 59% of their 45.4% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.8%; Real: +6.1%.
  • Gen Mdse Stores – All channels are up vs February. In actual sales, the only negative was Disc Dept Stores Ytd vs 2021. In real sales, the only positives were in monthly & Ytd sales for $/Value Stores vs 2022. Disc Dept Stores have the worst performance of any channel in all measurements and only 17% real growth since 2019. The other channels average 36%. Avg 19>23 Growth: SupCtr/Club: 6.1%, Real: 2.2%; $/Value Strs: +6.4%, Real: +2.4%; Disc. Dept.: +3.3%, Real: +0.6%
  • Office, Gift & Souvenir Stores – Actual sales are up from February and in all measurements vs 2022, 2021 & 2019. However, their real sales growth is still down monthly vs 2022 & 2021 and Ytd vs 2019. Their recovery didn’t start until the spring of 2021, but they are making progress. Avg Growth Rate: +1.2%, Real: -1.5%
  • Internet/Mail Order – Sales are up +13.0% from February and above $100B, a monthly record. They are positive for all measurements, but their growth rate is only 43% of their average since 2019. However, 80% of their 101.3% growth since 2019 is real. Avg Growth Rate: +19.1%, Real: +16.0%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in March. Real sales are down vs March & Ytd 2022, but all other measurements are positive. They are still the % increase leaders vs 2021 and 73% of their 59.5% growth since 2019 is real. Average 19>23 Growth: +12.4%, Real: +9.4%. They remain 2nd in growth since 2019 to the internet. I’m sure that Pet Stores are contributing.

There is no doubt that high inflation is an important factor in Retail. In actual $, 10 channels reported increases in sales vs 2022 and 7 vs 2021. When you factor in inflation, the number with any “real” growth drops to 3 vs 2022 & 2021. Inflation is slowing but not as fast as sales increases. Inflation has increased its impact at the retail channel level. Recent data indicates that Inflation again slowed a little. Let’s look at the impact on the Advance Retail $ales for April.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor with the largest increase in 40 years. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March then fell in April. Except for dips by Auto & Gas Stations, all actual sales are slightly positive. The biggest change is that of the groups’ total of 20 “real” sales measurements vs 22 & 21, only 6 are positive. 3 of those are from Restaurants but even their sales vs April 2022 are really down. This clearly shows the growing impact of cumulative inflation.

Overall – Inflation Reality – The April $ increase rate for all vs 2022 was below the inflation rate, producing negative real numbers. You also see the impact of cumulative inflation as real sales are down for all but Restaurants vs 2021. Restaurants still have the strongest performance vs 2022, 2021 & 2019. The biggest negative is in Relative Retail. Monthly & Ytd Real sales are down vs 2022 & 2021. Consumers pay more but buy less.

Total Retail – Every month since June 2020 has set a monthly sales record. December 2022 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in March then fell in April. Inflation is slowing but so is sales growth. Sales are up 0.2% vs last year. That’s the lowest rate since the -6.7% drop in May 2020. Also, real sales are down vs April 22 as well as monthly and Ytd vs 21. Plus, only 36% of the 19>23 growth is real. Inflation is slowing but it has been above 4% since March 2021. We are starting to see the cumulative impact. Avg 2019>23 Growth: +8.1%, Real: +3.2%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22, 21 & 19. Inflation decreased to 8.4% in April from 8.6% last month but is still +16.1% vs 21 and +20.6% vs 19. 42.0% of their 41.9% growth since 19 is real but that is less than the 53.3% of their 40.7% growth since 21. Recovery started late but inflation started early. Avg 2019>23 Growth: +9.1%, Real: +4.1%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better but got worse in March & April. April $ are down vs 22 & 21 and Ytd Real sales vs 2021 are also down. Their Ytd real sales vs 19 are still positive but slowing, despite continued deflation. Avg 2019>23 Growth: +6.9%, Real: +1.0%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then dropped 17% in Mar and 12.4% in April. However, prices are still +31.0% vs 21. The deflation actually caused monthly & Ytd sales vs 22 to drop but Ytd real sales are up. However, all real sales vs 21 & 19 are still down. Avg 2019>23 Growth: +6.9%, Real: -1.3%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020 and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops. Sales in March turned up then fell in April. All actual sales are up vs 22, 21 & 19 but all real sales vs 22 & 21 are down. Real sales vs last year have now been negative in 12 of the last 13 months. 49% of their 19>23 $ are real, which shows that Inflation is a problem that began in 2022. Their Avg 2019>23 Growth is: +8.5%, Real: +4.4%. The performance of this huge group is critically important. This is where America shops. The fact that real sales are down again is bad news.

Inflation is slowing slightly but the impact is growing. Sales increases are slowing, and the fact that 70% of all real sales measurements vs 22 & 21 are negative is very concerning. Restaurants are still doing well while Auto & Gas Stations are still struggling despite ongoing deflation. However, the biggest concern is Relevant Retail. They have definitely returned to Inflation Phase II – Consumers spend more but the amount bought decreases. The Apr sales increase rate is the lowest since the pandemic drop in April 20. This can lead to Phase III, when actual sales drop. Let’s hope for a turnaround.

Here’s a more detailed look at April by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.5%, Real: +4.4%. Only 3 channels were up from March but 5 were up vs 22 & 7 vs 21. Only 3 had a “real” increase vs 22 and 5 vs 21. The negative impact of inflation is visible in both actual & real data.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are down from March but up for all comparisons but vs April 22. However, their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +1.0%, Real: -1.7%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up from March and in all other measurements. Their real sales are also up slightly in all measurements but Ytd vs 21. Only 36% of their 28.5% 19>23 lift is real – the impact of inflation. Avg Growth: +6.5%, Real: +2.5%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from March but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 9.6% of the growth since 2019 is real. Avg Growth: +6.4%, Real: +0.7%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from March but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been low so 75% of their 22.1% growth from 2019 is real. Avg 2019>23 Growth: +5.1%, Real: +3.9%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Actual Sales are down from March and vs April 22. Real sales are down vs April 22 & 21 and Ytd vs 22. However, 62% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.7%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Sales are down from March and in all measurements but Ytd vs 21 & 19. Their real sales are all down vs 22 & 21 and only 8% of their 19>23 growth is real. Avg 2019>23 Growth: +4.7%, Real: +0.4%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are down vs March and in all measurements but Ytd vs 21 & 19. However, real sales are up for all but vs April 22. This happened because of strong deflation, -6.4>-7.6%. Avg 2019>23 Growth: +0.6%, Real: +2.4%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Sales are up 4% vs last month – 2 consecutive increases. The only other positives are Ytd vs 21 & 19. They have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their % sales growth since 2019 is real. Avg 2019>23 Growth is: +7.9%, Real: +1.9%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. $ales are down from March and in all other measurements but Ytd vs 22 & 19. Real sales are all down except vs 19. Just 3 months ago all measurements were positive. Their inflation is lower than most groups so 62% of their growth since 2019 is real. Avg 2019>23 Growth: +6.5%, Real: +4.1%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up from March and for all but real April 23 vs 22. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 68% of their 42.8% 19>23 growth and even 50% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.9%, Real: 7.0%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from March but all measurements are positive. 78% of their 89.2% growth since 2019 is real. Their Avg Growth: +17.3%, Real: +14.1%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Apr which should improve the Retail Situation. Sales were down from March for all big groups and 8 of 11 smaller channels. While Inflation continues to slow in most channels, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is now below the lower inflation rate. This is evident in Relevant Retail as Real sales are now negative for all but Ytd vs 2019. However, actual & real sales vs 22 are now negative for most channels. Only 3 – NonStore, Clubs/$ Strs & Health Care are both actually and really positive vs 22. We seem to have returned to Inflation, Phase II, increased $ales but a decrease in the amount sold. However, some channels may be moving to Phase III, when actual $ales also decrease.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.