International News｜The Market For Kitchens And Bathrooms Cools Down Significantly! U.S. Q2 KBMI Key Index Hits Two-Year Low
Recently, the National Kitchen & Bath Association (National Kitchen & Bath Association) and real estate analyst John Burns Real Estate Consulting (Bernstein Real Estate Consulting) jointly released the second quarter 2022 Kitchen and Bath Market Index (KBMI) report, which shows that the kitchen and bath market “cooled significantly” due to rising product and material costs and the impact of overall economic uncertainty and supply chain disruptions on the market. Business conditions in the kitchen and bath market “cooled significantly” due to rising product and material costs and the impact of overall economic uncertainty and supply chain disruptions on the market.
While the U.S. Kitchen and Bath Market Index is still expected to grow in sales in the second quarter of 2022 compared to the same period last year, there are clear signs of sales deceleration in each of the key components of the KBMI compared to the first quarter of 2022. Full-year U.S. kitchen and bath sales are expected to grow 9.4 percent in 2022, down sharply from the 15.1 percent growth forecasted in the report three months ago.
The overall KBMI for the second quarter was 70.4, the lowest level since the fourth quarter of 2020, according to the NKBA, which said index ratings above 50 on a 100-point scale reflect market expansion, while index ratings below 50 reflect contraction.
The trade association noted that of particular concern is the latest index of expected future business conditions. The index stood at 61.8, down sharply from 78.6 reported in the previous quarter and the lowest level in more than two years.
Fifty-nine percent of design firms and 82 percent of construction firms reported project cancellations or delays. Construction project completions in the second quarter were up 6.2% year-over-year, though. However, supply chain issues and inflation will remain a challenge in the third and fourth quarters of 2022. According to manufacturers, they are receiving products in inventory at a faster rate than in previous years. “While it is encouraging to see some initial signs of relief from supply chain and inventory concerns, it is clear that macroeconomic volatility is having some initial impact on demand,” said Bill D’Arcy, CEO of NKBA in Hackettstown, N.J.
D’Arcy added: “Concerns about inflation and interest rates and their potential impact on the industry are understandable, but the industry outlook for future business conditions suggests that there is still cautious confidence in the ability to move forward.”
According to KBMI, material costs and the impact of inflation are listed as two of the industry’s top concerns. The supply chain issue, previously the biggest concern, is now the third biggest, according to the Hackettstown, N.J.-based NKBA. The NKBA’s index is a member’s assessment of the current and expected health of the industry.
The members reported an average annual cost growth rate of 11 percent, and more than 40 percent of respondents said they were passing cost increases on to consumers. Others said they are changing their purchasing decisions to control costs, find lower-cost alternatives, or maintain costs at the expense of declining margins.
Fifty-nine percent of respondents reported customer delays or cancellations in the second quarter, significantly higher than the 48 percent reported in the first quarter. Reasons for customer withdrawals include concerns about the impact of inflation on disposable income and less cash available for retrofit projects due to rising interest rates.