Tariffs Seen Boosting U.S. Products
HACKETTSTOWN, NJ — U.S. trade policy is having a “varied” impact on the kitchen and bath market, causing price inflation for manufacturers and delays for construction companies, even as the industry continues to grow and U.S.-made products thrive.
That’s the key finding of the latest in a quarterly series of “Kitchen & Bath Market Index (KBMI)” reports issued by the National Kitchen & Bath Association in conjunction with John Burns Real Estate Consulting. The report, which covers the third quarter of 2019, examines the economic pulse of the kitchen/bath industry and can be used to gauge macroeconomic conditions, including consumer confidence, manufacturing and discretionary spending (see related Barometers, Page 12; Forecast 2020, Page 44).
According to the report, the third quarter proved to be “positive” for the kitchen/bath remodeling industry, with a KBMI of 65.4 (consistent with Q2’s index of 65.7) revealing “sustained expansion.” KBMI scores above 50 indicate growth, according to the NKBA and John Burns, an Irvine, CA-based market analyst.
“With overall industry response to tariffs mixed, some members have been able to adjust to trade issues,” said the Hackettstown, NJ-based NKBA, noting that 54% of surveyed members report that tariffs “have made a moderate, high or significant financial impact to their business, with manufacturers hit hardest (at 59%).
“One in three members have had to raise prices on products and material,” the NKBA said, noting that American-made products “are booming.”
“While 33% of NKBA members have had to raise prices, another third are offering different products as a result of trade issues,” the KBMI found. “This has driven business to domestic brands, as well as put higher-quality American-made products in the same price range as entry-level imports. Engineered quartz countertops and entry-level kitchen and bath cabinetry have been particularly affected.”
Other key findings from the Q3 KBMI include:
- Fourth-quarter outlook cautiously optimistic: Industry experts rate current business conditions at 61.7, similar to Q2 (62.7) and slightly lower than Q1 (67.5). Future business conditions look more positive than current ones, a trend evident over the last three quarters, with an index reading of 68.4 in Q3, 68.7 in Q2 and 76.1 in Q1 (see related graph, right).
- Positive sales growth still expected: NKBA members expect a 3.5% sales growth for the full year, not quite as hopeful as the 4.7% and 5.4% growth predicted in the previous two quarters.
- Industry health is stable: Industry insiders assess the health of the kitchen and bath industry at 6.7, remaining steady from Q2’s 6.6 and Q1’s 6.8. Building and construction firms and retail dealers rate the health of the industry at 6.8, followed by manufacturers at 6.7 and designers at 6.6.
- In addition to the industry’s ongoing labor shortage, NKBA’s membership base – including kitchen/bath designers, manufacturers, retailers and building/construction firms – cites rising material prices, size of customers’ budgets, fear of recession and labor costs as their primary concerns. ▪