Moving Beyond an Extended Period of Economic and Political Uncertainty
By NKBA Editorial Staff
The final quarter of 2024 is likely to be a fitting conclusion to a year of modest growth, dominated by persistent economic and political uncertainty. However, K&B companies are looking ahead to next year with considerable optimism. The hundreds of K&B pros surveyed for the Q3 2024 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report shared expectations of very healthy growth in revenue in the coming year, averaging 8% across all segments of the industry.
In Q3 2024, the KBMI Index was essentially flat, rating 53 out of 100, a slight one-point decrease from the previous quarter (ratings above 50 reflect expansion in the sector). Conducted jointly by the National Kitchen & Bath Association and John Burns Research and Consulting, the KBMI report includes data and insights from the NKBA Community across four segments: design, building and construction, retail and manufacturing.
Here are some additional highlights from the Q3 2024 KBMI report:
Economic and Political Uncertainty Translate to Stagnancy
Demand for kitchen and bath products and upgrades remained stagnant amid economic and political uncertainty weighing on U.S. consumers this year. In Q3, kitchen and bath professionals downgraded their 2024 revenue growth outlook to 1.3% year over year (YOY) on average, down from 2.7% the previous quarter. While the Fed lowered interest rates in September, many consumers are still waiting to see more significant reductions in borrowing rates. Indications are that more favorable borrowing rates, as well as a resolution to the contentious political season, will move more homeowners to finally pursue their renovation projects.
A Notable Bright Spot: Retail
One sector that stood out for its optimistic take was retail — firms’ overall KBMI rating strengthened substantially during Q3, up 4.5 points to 52.5, in part due to the anticipation of better economic times ahead. In the Current Kitchen & Bath Activity Index for the quarter, which rates current quarter residential kitchen and bath sales compared to one year ago, the retail sales sector showed considerable strength (up 7.7 points). Retail was the only sector to predict increased sales for the final quarter of the year.
Ongoing Impact of the Skilled Labor Shortage
After consumer uncertainty (51%), the next biggest constraint to growth cited by surveyed K&B pros was the persistent shortage of skilled labor (33%). More than a quarter (29%) cited high materials costs. Weak existing home sales ranked lower this quarter, with only 19% of firms saying it is holding them back.
Slow End to 2024, with Major Optimism About 2025
The current year is ending on a neutral note. Revenue growth for K&B projects and services averaged 0.7% YOY in the third quarter. But K&B pros broadly expect the market to make a solid recovery in 2025. Professionals’ expectations for 2025 revenue growth ranged from 4 to 9% YOY, with smaller firms – which tend to experience more volatility in sales over time — expecting higher growth on average. The design (9.2%) and manufacturing (9%) sectors are especially bullish, anticipating the highest revenue growth next year. Building & construction was not far behind (8.3%). The retail sector reported the most conservative growth expectations for 2025 at 4.2%.
“There is no denying that 2024 is turning out to be a stable but largely underwhelming year for our industry,” said Bill Darcy, Global President & CEO, NKBA | KBIS. “With the Fed’s initial interest rate cut and the likelihood of more reductions to come, as well as the imminent conclusion to a highly intense political season, K&B pros are telling us that they expect to see steady growth finally start to take root after the new year.”
For additional data and insights, download the full Q3 2024 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report here.
