Consumer prices and business costs are not subject to the laws of gravity, but fortunately, the adage “what goes up, must come down” seems to be applying to U.S. pet food prices, both retail and producer. They both recorded consecutive months of declines in July 2023.
For the pet food producer price index (PPI), the preliminary July figure came in at 8.9% year over year (YOY) for dog and cat food. That followed the final figure for June at 9.3% YOY, which followed May’s final of 14.2%. So the big drop from May to June was good news indeed, and if July’s figure holds up, things are definitely trending in a positive direction. (The data from the U.S. Bureau of Labor Statistics, or BLS, comes from John Gibbons, aka the Pet Business Professor, who has explained that it takes BLS a few months to finalize the numbers.)
Even more good news: Pet food retail prices are also going in the right direction. For July 2023, this niche equivalent of the consumer price index (CPI) was 10.6% YOY, down from 12.1% YOY in June, 13.8% in May and 14.6% in April, meaning four straight months of declines. If the July pet food PPI number holds, it will portend well for future retail price drops, too.
Not out of the woods yet
Though the YOY pet food CPI ticked down in July, the fact that the overall CPI ticked back up a little, to 3.2% from 3% in June, is confirmation that the U.S. economy (and most around the world) is not in the clear yet, especially as climate-related disasters and geopolitical tensions like the war in Ukraine and souring U.S.-China relations continue.
The war in particular is affecting food and commodity supplies, which has an indirect impact on pet food. Though U.S. inflation for “food at home” (groceries, essentially) was 3.6% YOY in July, down from 4.7% in June, some economic experts are warning that the stubborn inflation in certain sectors such as food may become a new normal.
U.S. overall pet care inflation (what Gibbons calls “petflation”) was also down in July to 8.7% YOY, compared with 9.6% in June. Yet Gibbons pointed out that petflation is still 2.7 times greater than the national CPI, not as bad as its high of more than 3 times greater earlier in the year, but still not great. And pet food inflation is still more than 3 times the overall CPI. Other pet care segments with concerning inflation include veterinary services (10.63% YOY in July) and pet services (6.35%, up slightly from June).
Breakdown of cat and dog food PPI
Gibbons’ analysis of the dog and cat food PPI included breakdowns by product category. As has been the case for several months now, wet was the main driver with dog food in July, at 15.8% YOY (unchanged from June in this preliminary data); dry/semi-moist dog food was at 6.1% YOY, down from 7% in June. Overall, the dog food category PPI for July was 7.7% YOY, also a drop from June (8.3%).
With cat food, the PPI for July was 13% YOY, down slightly from June’s 13.3%. In this case, dry/semi-moist cat food has been the driver behind higher producer prices, though it’s July figure of 18.9% YOY was down from June’s 19.4%. Wet cat food remained stable at 6.5% YOY.
Let’s hope the downward trends are confirmed in the final data. Ongoing declines would certainly be welcome.