BETHELHEM, PA — The current kitchen and bath industry slowdown is expected to continue into 2023 as consumer demand steadily declines and recession fears continue to rise, according to the latest in a quarterly series of market studies conducted by the National Kitchen & Bath Association.
According to the third-quarter 2022 NKBA/John Burns Kitchen & Bath Market Index (KBMI), the overall market index of 63.2 is the lowest it has been since the third quarter of 2020, while the future conditions rating of 55.4 is at its lowest level since 2020’s first quarter.
The Q3 2022 KBMI also reflects a 1.3% decline in full-year 2022 sales expectations, versus full-year growth expectations of 9.4% reported in the second quarter – this after two banner years of gains during formidable obstacles, according to the Bethlehem, PA-based NKBA, whose latest KBMI was compiled on the basis of a survey of nearly 600 industry professionals from four primary industry sectors: design, building and construction, manufacturing and retail.
Each quarterly KBMI assesses the overall state of current and future market conditions, along with issues and challenges that industry professionals are facing. On a 100-point scale, KBMI ratings above 50 indicate industry growth, while ratings below 50 indicate slowing activity.
While the Q3 2022 ratings remain above 50, which continues to indicate expansion, “their deceleration is indicative of the industry managing its expectations as consumer demand slows and recession concerns rise,” the NKBA said.
“There is understandable concern about 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’ve all learned over the past two years, however, is that adaptability is the key,” Darcy said. “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.”
As a result of current trends, industry professionals “are proactively adapting their business strategies,” Darcy added. “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,” he said.
Other key Q3 2022 KBMI report findings include:
n Recessionary fears are real. Industry professionals report that “fear of recession” is what keeps them awake at night, with 24% rating this as their top concern. This is followed by the availability and cost of skilled laborers (20%) and cost of materials (17%).
n Demand continues to slow. For Q4 2022, 31% 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% of building and construction firms, and 65% of design firms..
n The industry still has pricing power. Despite steadily increasing inflation impacting nearly every product category, 61% 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.
n Agility key in the face of changing economic conditions. 47% of kitchen and bath professionals are highly confident in their preparedness for an economic downturn. Although expectations of a 2023 downturn are high as inflation and interest rates increase.