The index’s 4th quarter results show current strength and optimism for 2020. By Dianne M. Pogoda
Business is looking good.
NKBA’s Kitchen & Bath Market Index, a snapshot of current K&B market conditions and expectations for the quarter and year ahead, reported that business picked up steam in the 4th quarter, and NKBA members projected solid confidence for growth going forward.
At 69.8, the overall Q4 2019 KBMI rates higher than the 3rd quarter and about as strong as one year ago. The rating is out of 100, with 50 being flat. Scores above 50 indicate industry growth, while scores below 50 indicate slowing activity. The Q4 index is now well above the prior three quarters. The strong 4thquarter, however, wasn’t enough to fully make up for weakness in the first nine months of the year, so across all segments, 2019 performance was slightly below the prior year’s rating of 70.1.
Conducted jointly by the National Kitchen & Bath Association and John Burns Real Estate Consulting, the Kitchen & Bath Market Index (KBMI) examines current kitchen and bath industry demand, future expectations, and issues and challenges that industry professionals are facing in their businesses. The overall composite index comprises current conditions, future expectations and perceived health of the industry.
NKBA members surveyed are generally optimistic about business conditions and the industry has high expectations for the upcoming year.
Looking at the quarter ahead, at 76.6, the industry expects Q1 2020 sales to be higher than Q4 2019 sales. Manufacturing companies are the most optimistic (79.6), followed by retailers at 78.2, designers at 75.8, and building and construction firms at 74.7.
The overall health of the kitchen and bath industry is generally rated as strong, at 7.2 out of 10, with 5 being neutral. Building and retail segments both rate the health of the business at 7.3, with manufacturers coming in at 7.1 and designers at 7.
Another signal of confidence is plans for capital expenditures. The survey reported that 51% of manufacturers expect to increase capital expenditures in 2020 relative to 2019 levels, which indicates most of the industry is planning for continued growth. Only 4% report they are decreasing investments in capital equipment and no large manufacturers (with sales over $100 million) said they were decreasing capex levels.
The Q4 report is based on findings from 602 NKBA members across four primary industry segments: Designers, retailers, manufacturers and building/construction professionals. Designers made up 43% of this quarter’s survey, with retailers at 23%, builders at 21% and manufacturers at 13%. Although a smaller segment, percentage-wise, manufacturers typically are much larger companies and represent greater total revenue.
A Robust View of U.S. Economy
KBMI also polls about the general state of the U.S. economy, and 61% of NKBA members surveyed rank overall conditions at a 7 or higher out of 10, indicating the economy is strong or extremely strong, which portends well for home sales and remodeling projects. Just 22% rank the state of the economy at a 5 or less.
The index revealed that countertops, stoves and cabinets are the top three kitchen products were consumers most commonly splurge. Cabinet hardware, flooring, smart lighting and smart plumbing are at the bottom of this list.
In the bathroom, consumers are more likely to splurge on countertops, vanities and medicine cabinets, with hardware, smart plumbing and smart lighting similarly at the low end of these priorities.
As for the most significant challenges faced by the industry, the story has been consistent for several quarters. The availability of skilled laborers tops the list of concerns, rated at 7.7 out of 10. The cost of materials (7.2) and cost of labor (6.9) are next among the industry’s most significant challenges and concerns. Concerns about the economy, trade policy, and consumer confidence remain near the top of the list, but rank lower than in recent quarters as trade tensions ease and the U.S. housing market rebounds after a predominately slow first half of the year.
To receive a copy of the full report, visit store.nkba.org. NKBA members who would like to participate in the quarterly survey should email marketresearch@nkba.org.
