HACKETTSTOWN, NJ — Business conditions in the kitchen and bath market are “clearly cooling,” as rising product and materials costs coupled with economic uncertainty and lingering supply chain disruptions continue to take their toll on the market.
That is the key conclusion of the latest in a quarterly series of Kitchen & Bath Market Index (KBMI) reports issued by the National Kitchen & Bath Association in conjunction with housing analyst John Burns Real Estate Consulting.
According to the Q2 2022 KBMI, although year-over-years sales are expected to increase, “there is a clear pattern of sales deceleration” in each of the KBMI’s key component measures compared to the first quarter of 2022. Full-year 2022 kitchen and bath sales are expected to rise by 9.4%, down from the 15.1% projected growth rate reported three months ago. The overall KBMI for Q2 was 70.4, the lowest the Index has been since the fourth quarter of 2020, according to the NKBA (see graph above).
Of particular concern, the trade association noted, is the latest index for anticipated future business conditions, which posted a reading of 61.8, a sharp drop from the 78.6 reported last quarter and the lowest level in more than two years.
“While it’s encouraging to see some initial signs of easing in supply chain and inventory concerns, it’s clear that macro-economic volatility is having some initial impact on demand,” said Bill Darcy, chief executive officer for the Hackettstown, NJ-based NKBA.
“There is understandable concern around inflation and interest rates and their potential impact on the industry, but the industry outlook on future business conditions indicates there is still cautious confidence in the ability to navigate a path forward,” Darcy added.
According to the KBMI, the cost of materials and the impact of inflation rank as the two top industry concerns. Supply chain issues, previously the greatest concern, now ranks as the third-greatest concern, according to Hackettstown, NJ-based NKBA, whose Index is a gauge of members’ assessment on the current and anticipated health of the industry.
Members reported year-over-year cost increases that average 11%, with more than 40% of those surveyed indicating that they are passing the cost increases on to clients. Others said they are altering purchase decisions to rein in costs, finding lower-cost alternatives, or maintaining costs at the expense of profit-margin erosion.
59% of those surveyed reported client postponements or cancellations in the second quarter, a marked increase over the 48% reported in Q1. Reasons for clients’ pullbacks include concerns over the impact of inflation on disposable income and the decline of ready cash for remodeling projects due to increased interest rates. ▪