Key Takeaways:
- Kitchen and bath market indices are at their weakest since Q3 2020;
- All four industry segments project a weaker 2023 outlook;
- Almost half of K&B pros feel highly prepared for an economic downturn.
By Dianne M. Pogoda
The overheated housing market has cooled considerably, as indicated by the 2022 Q3 NKBA/John Burns Kitchen & Bath Market Index(KBMI) that sank to 62.3 on a scale of 100 — the weakest rating in two years — sliding from 70.4 in Q2.
Perhaps more telling, the “future conditions” component of the KBMI is the lowest subindex — slipping to 55.4 from 61.8 in Q2, and from 78.6 in Q1. This reflects a weaker 2023 industry and general economy outlook, resulting from lingering inflation and recession fears, sagging consumer confidence, labor cost and availability, declining home sales and continuing rate hikes. The kitchen and bath industry now expects modest sales growth of 1.3 percent for full-year 2022, mainly from an 11 percent spike in prices, tempered by a 9.7 percent decline in volume. It marks a sharp reversal from the Q1 robust full-year projections of a 15.1 percent gain.
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The report is not all grim, however. The index is still comfortably above a rating of 50, indicating expansion. (Ratings below 50 indicate contraction.) Builders ranked highest, at 68.5, while designers and retailers each came in at 61.8. Manufacturers were in the middle at 63.2.
The softening environment has forced all industry segments to come up with creative solutions to meet the challenges. For instance, to appeal to a broad range of consumers, some of whom might have budget concerns, design firms are finding options in materials, finishes and cabinet lines; building and construction firms are limiting estimates to 30 days; and retailers are scaling back on orders from manufacturers. Manufacturers say the pullback in demand has freed up capacity, allowing them to produce and ship faster. Backlogs are returning to more normal conditions, as all segments tighten their overhead and inventories.
Even as demand wanes — 31 percent of design firms expect a Q4 decrease in new project leads — the kitchen and bath industry still has pricing power, at least for now: 61 percent report margins are holding steady with last year, despite cost pressures that continue to escalate.
Labor availability and cost are still an issue, but one that has been plaguing the business for a while, so companies have learned to cope, often retaining workers with higher wages.
The KBMI is a quarterly report based on a member survey among four main industry segments – designers, retailers, manufacturers and builders – gauging the economic health of the U.S. kitchen and bath industry. Conducted jointly by NKBA and John Burns Real Estate Consulting, the Q3 report surveyed about 600 respondents.
Go here to download the full report.