Despite a tough economic climate, many pros feel positive about the future as supply chain challenges vanish and price increases taper off.
By Elisa Fernández-Arias
NKBA’s Q3 2023 Kitchen & Bath Market Index (KBMI) indicates that despite a current slowdown in business, many industry professionals forecast a rebound in the second half of 2024. The quarterly KBMI report examines current and future demand for kitchen and bath products/ services as well as the biggest issues and challenges facing the industry. The report provides valuable insights, providing both historical context and forecasts that can help with future planning and strategy.
Key takeaways from our most recent KBMI report include:
- KBMI rating is more resilient than expected in this tough economic environment. The Q3 2023 KBMI dipped 2 points to 53, marking a nearly two-year period of market deceleration. The overall market for residential K&B products and services is still in the ‘Expanding’ range (ratings over 50 indicate industry growth), albeit in a very low-growth state. In Q3, cancellations and postponements rose, while project completions and new business leads declined.
- All four segments report KBMI declines, but not to the same degree. Designers, with their more affluent customers, were less impacted by softening consumer demand. Retailers, who are unprotected by backlogs and exposed to a broader range of consumers, experienced the greatest struggle. The Q3 KBMI ratings for each segment are: Design, 55; Building and Construction, 54; Manufacturing, 52; and Retail Sales, 47.
- Q3 K&B industry sales slowed across most, but not all, of the country. Average kitchen and bath industry sales growth fell -0.1 percent in Q3 2023 on a year-over-year basis, however, there were distinct regional differences. Growth turned negative in the West and Northeast, while the Southeast (especially Florida) was a bright spot.
- Rising labor costs and availability of labor remain the industry’s biggest challenge. K&B firms rated the cost and availability of skilled labor as a highly pressing concern. They expect to raise their hourly wages by 4.9 percent on average in 2024, and many are developing apprenticeship programs and/or are increasing their networking efforts to find skilled laborers.
- Silver linings: Price increases are slowing down and supply chain challenges have nearly vanished. Year-over-year price increases in Q3 2023 were on par with inflation growth (3.6 percent), and K&B firms report that they will increase their prices by only 1.7 percent through Q1 2024. Along with more stable pricing, supply chain challenges have nearly vanished.
- Kitchen and bath professionals expect a return to growth in 2024. Forty-four percent of all K&B firms, and 49% of manufacturers, expect sales revenue to increase in 2024. Most firms expect any significant pick-up to occur in the second half of 2024.
The Q3 2023 KBMI report includes additional data by industry segment – design, manufacturing, retail sales and building/construction. To download the full report, click here.