As of this writing, the news of significant, new tariffs on products from U.S. trading partners — and their potential impact on the American economy, companies and individual consumers — continues to make headlines. The ultimate outcome of this fundamental reshaping of U.S. trade policy is still to be determined. In the meantime, the K&B industry is contending with yet another element of uncertainty, something that tends to adversely affect short-term growth.
Going into 2025, industry pros expressed cautious optimism about a return to gradual growth for the residential kitchen and bath market following two consecutive years of decline. Our NKBA Kitchen & Bath Market Outlook Report projected that U.S. residential kitchen and bath spending would grow by +0.8% to $235 billion in 2025, up $2 billion from last year.
I mentioned in my State of the Association address at KBIS that we would be keeping our eye on two big unknowns that represent downside risk to our 2025 forecast. The first is what will happen with the so-called “missing middle,” the large group of homeowners who are chomping at the bit to start mid-range renovations but have held off, in large part, because of stubborn borrowing rates. They remain the key to a full recovery in K&B remodels.
The second unknown is the impact of tariffs and changes to immigration policy. We are still waiting to see how much these factors will change the cost of K&B materials and labor – and how those increases will alter consumer behavior.
We do have some early indications, based on findings in our latest 1Q25 NKBA Kitchen & Bath Market Index (KBMI) report. In short, uncertainty about tariff policy is heavily influencing the K&B industry’s more muted outlook for 2025 – professionals now rate trade issues as their number one concern impacting the industry.
A few important tariff-related insights:
- Tariff-related concerns and fears of a recession impaired consumer and business confidence in 1Q, diminishing the industry’s ability to plan.
- K&B manufacturers’ orders rose +4.4% YOY in 1Q25, due in part to pre-buying by downstream firms anxious about pending tariff-related price increases.
- Input costs rose significantly in 1Q, adding to inflationary pressures.
- K&B retail and distribution firms report that their suppliers raised prices by +5.2% YOY in 1Q25, reversing previous progress on kitchen and bath product inflation.
- Markups in 1Q25 were highest (+7% YOY) for appliances, which have heavy exposure to countries impacted by recent tariff policy shifts.
- Many firms had no choice but to raise prices in response. Kitchen and bath builder and remodeler pricing grew to +5.2% on average in 1Q25.
- Two-thirds of K&B firms (68%) reported that consumers either held steady on product quality or downgraded to lower-grade products in 1Q25, reflecting caution in the planning of kitchen and bath renovations.
The industry expects supply chain disruptions to increase and pricing to continue to drift upward as tariffs re-shuffle the international trade balance.
While NKBA isn’t a lobbying organization, we do have an important role to play in facilitating dialogue and surfacing data and other insights from our members – both here in North America and in other global markets — about how federal policies are affecting the health of our industry.
To that end, I encourage you to register for our new webinar – airing May 2 at 12 pm (Eastern Time) – featuring the perspective of Nishu Sood, Principal of Research, at John Burns Research & Consulting, about the major macroeconomic events we are all closely following. Among other insights, Nishu believes the glaring headlines about tariff policy changes may be having an inflated impact, and that there’s reason for some optimism that business and consumer sentiment will ultimately improve based on actual experiences.
Nishu’s presentation will be followed by an overview of key findings from the new 1Q25 NKBA Kitchen and Bath Market Index (KBMI) report about K&B consumer and business sentiment.
It’s a volatile period for our industry, which means that now, more than ever, it’s essential to stay informed and connected.
