NKBA Kitchen & Bath Market Index – Q3 2022

As reported on November 9^th, the overall index, NKBA’s quarterly survey gauging the economic health of the North American kitchen and bath industry, slid to 62.3 on a scale of 100 — the weakest rating in two years —from 70.4 in Q2. More pointedly, the “future conditions” subindex fell to 55.4 from 61.8 in Q2 and plunged from 78.6 in Q1, reflecting lingering inflation and recession fears, sagging consumer confidence, labor cost and availability, declining home sales and continuing rate hikes.

The sharp deceleration in full-year 2022 sales expectations is dampening the 2023 outlook as well. In the 3^rd quarter, respondents pulled way back to predict full-year 2022 growth of just 1.3 per cent, down from 9.4 per cent growth forecasted in Q2 and 15.1 per cent growth expected in Q1. And that 1.3 per cent forecast is not real project growth; rather, it’s the result of an 11 per cent price spike and a 9.7 per cent drop in volume.

Design firms expect demand for their services will continue to slow, with 31 per cent forecasting a Q4 drop in new project leads. They may have good reason to think so: project cancellations and postponements are at their highest, with 65 per cent of design firms reporting canceled or delayed projects, up from 17 per cent in Q1. Meanwhile, 75 per cent of builders reported cancellations/postponements, a 29 per cent rise from the start of the year.

Manufacturers and builders also reported a deceleration in Q3 growth, although retailers saw a small 0.6 per cent uptick.

For the first time since the Kitchen & Bath Market Index (KBMI) began in Q4 2018, members said “fear of recession” is their top concern, followed by ever-present worries over labor costs and availability, and cost of materials.

There’s a silver lining, however. While K&B pros generally lack confidence in the overall economy, the industry has been preparing strategically for a downturn with some 47 per cent say they’re “highly prepared” to weather an economic recession. Many firms are postponing hiring, saving cash and budgeting for slower business, reducing inventories, diversifying product lines to remain nimble, offering a wider price range for skittish consumers, and keeping overhead to a minimum.

The KBMI surveys members in four main industry segments — designers, retailers, manufacturers and builders — to gain insights about the industry’s current conditions and health and future expectations. Conducted jointly by NKBA and John Burns Real Estate Consulting, the Q3 KBMI survey garnered about 600 responses.