Deflation in the US pet category began in June, but is this trend likely to continue for the rest of the year?
The US pet segment has shown signs of deflation in the last few months. According to the Consumer Price Index (CPI), the price of pet food and pet supplies in the North American country accumulated negative inflation over the summer.
Prices of pet food went from 0.8% in May down -0.2% in June and July. In August, the number moved up slightly to -0.1%. The price of general pet supplies fell from 1% in May to -0.5% in June, -0.4% in July and -0.1% in August.
In both pet categories, June was the initial start of the industry showing signs of deflation. Although both pet food and pet categories have edged into negative percentages, there are signs that they are moving back toward inflation.
Why is deflation happening?
Bryan Jaffe, Managing Director at Cascadia Capital, lists the main contributory factors that he says “collectively are supporting the deflationary cycle.”
“The market is bifurcating into a super-premium market (as evidenced by the growth in alternative form factor pet food) and a commodity market,” he states.
Under the market bracket of super-premium, there are “baby boomers who are aging out of pet ownership and trading down on pet size; this is partially offset by younger owners who can afford these solutions or are willing to stretch,” he explains.
Timing is also a factor. “The balance is the timing of pricing decisions made by retailers and pet food brands that move in three-to-six-month increments,” Jaffe points out.
2023 vs. 2022
If we compare this year with the summer months of 2022, inflation was positive then.
Pet food recorded a positive inflation of 1.3% in June 2022, followed by a similar trend in July (1.2%) and August (1.7%).
For the general pet category, inflation last year was slightly lower in pet goods. According to the official BLS data accessed by GlobalPETS, inflation reached 1% in June, then lowered to 0.6% in July and increased again in August (1.6%).
Concerns from the White House
Officials in Washington believe that although deflation provides relief from inflation, there are some risks if the situation continues over time.
“Pervasive deflation across many different goods and services, however, is a rare phenomenon in advanced economies, and it is usually a sign of dangerously weak growth,” they say.
If you missed our analysis of deflation in China, you can catch up on it here. Don’t forget to stay tuned for more insightful perspectives on economic trends and their global impact.
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