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The National Kitchen & Bath Association (NKBA), a world-leading not-for-profit trade association for the kitchen and bath industry, has released its Kitchen & Bath Market Index (KBMI) for Q3 2022. The overall market index of 63.2 is the lowest it has been since Q3 2020 and the future conditions rating of 55.4 is at its lowest level since Q1 2020. Both are indicative of industry professionals' prediction that the current economic slowdown will continue.
The quarterly KBMI report assesses the overall health of the kitchen and bath industry, along with issues and challenges that industry professionals are facing with their businesses. On a 100-point scale, KBMI ratings above 50 indicate industry growth, while ratings below 50 indicate slowing activity.
While Q3 2022 ratings remain above 50 across all segments (Design, Building & Construction, Retail Sales and Manufacturing), their deceleration is indicative of the industry managing its expectations as consumer demand slows and recession concerns rise. Additionally, Q3 2022 KBMI indicates a 1.3 percent decline in full-year 2022 sales expectations, versus full-year growth expectations of 9.4 percent reported in Q2 2022 — this after two banner years of gains during formidable obstacles.
As a result of current trends, industry professionals are proactively adapting their business strategies. Design firms have altered materials/finishes used on projects; building and construction firms have limited estimates to 30 days, and retailers have scaled back on orders from manufacturers.
"While the index remains above 50, which continues to indicate expansion, there is understandable concern around current and predicted economic conditions, and the potential impact on the kitchen and bath industry leading into 2023," said Bill Darcy, NKBA CEO. "One lesson we have all learned over the past two years, however, is that adaptability is the key. For instance, we see it with design firms currently leveraging new brands for better lead times and availability — as well as those who feel their businesses are well-prepared and positioned to meet the challenges of an economic slowdown."
Other key report findings include the following:
"Recessionary Fears" are real. Industry professionals report that 'fear of recession' is what keeps them up at night, with 24 percent rating this as their top concern. This is followed by the availability and cost of skilled laborers (20%) and cost of materials (17%).
Demand continues to slow. For Q4 2022, 31 percent of design firms expect a decrease in new project leads. Additionally, project cancellation/postponement rates are the highest they've been in 2022, as reported by 75 percent of building and construction firms, and 65 percent of design firms.
The kitchen & bath industry still has pricing power. Despite steadily increasing inflation impacting nearly every product category, 61 percent of industry professionals report margins on par with a year ago. As consumers become increasingly budget conscious, however, they are pushing back on price increases and/or pausing remodeling projects, likely causing pricing power to wane.
Agility is key in the face of changing economic conditions. Forty-seven percent of kitchen and bath professionals are highly confident in their preparedness for an economic downturn. Expectations of a 2023 downturn are high as inflation and interest rates increase.To request the full report, contact Brittany Loeffler at firstname.lastname@example.org.