NKBA/John Burns Kitchen & Bath Market Index (KBMI) – Q3 2019

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NKBA/John Burns Kitchen & Bath Market Index (KBMI) – Q3 2019

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We are pleased to release the Q3 2019 NKBA / John BurnsKitchen & Bath Market Index(KBMI), the industry’s definitive gauge of kitchen and bath industry conditions. This quarterly index is the result of a partnership between the National Kitchen & Bath Association and John Burns Real Estate Consulting.

The industry continues to expand, but our survey shows clear signs of slowing demand and decreasing optimism as current and future business conditions both rate below the prior three quarters.Our Q3 2019 survey shows:

  • Continued sales growth. The kitchen and bath industry expanded again in Q3 2019, as the KBMI rated a 65.4 on a scale of 0–100, with 50 being flat sales growth. Q3’s KBMI is in line with last quarter, but well below Q1’s rating of 71.0. The industry points to rising labor and material costs, unfavorable lead times, and a shift in demand to lower-priced products as the underlying challenges.

  • Future industry outlook remains positive. The industry is still more positive on future conditions (68 index reading) than on current conditions (62 index reading), but 2019 sales growth expectations continue to weaken on rising material and labor costs and project delays.

    • The industry now expects +3.5% full-year sales growth in 2019, down notably from +5.4% expected growth reported by NKBA members in Q1 2019.

  • The two biggest challenges and concerns of the industry continue to be the availability of skilled labor and cost of materials. NKBA members now cite the size of customer’s budgets as the third biggest challenge. Budget concerns are increasingly reported across segments as trade policy drives up the cost of products and materials.

  • The industry says trade policy has had varying degrees of influence on the market—domestic manufacturers largely benefit while distributors and construction companies with more exposure to import products struggle to maintain supply chains, meet customer demands, and compete in the short-term.
  • Across industry segments, NKBA members describe how tariffs on various kitchen and bath products, components, and materials have impacted their businesses.
    • Manufacturers broadly cite price inflation across various product categories, notably ready-to-assemble cabinetry, vanities, and low-price point engineered stone slabs. Domestic producers, however, highlight stronger growth across many of their product lines and say the price gap between imported goods and domestic offerings is now much easier to bridge with consumers.

    • Building and construction companies say limited availability has caused some consumers to cancel project plans and others to experience severe delays driven by the need to re-specify or re-bid, as many products are impacted by longer lead times or significantly higher standard costs.

    • Retailers and dealers say tariffs have increased consumers’ hesitancy to invest in large, high-cost kitchen and bath projects as concerns about the health of the economy steadily rise.Others say they are curbing growth plans in categories significantly impacted by tariffs.

    • Designers express frustration with tariffs and say increased administrative work in product procurement is limiting their ability to grow and negatively impacting their credibility with clients.

  • Many industry members report some of their suppliers have begun moving their supply chains to countries not directly impacted by tariffs, which should ease supply constraints in the near term.