The National Kitchen & Bath Association (NKBA) and John Burns Real Estate Consulting have released the 2019 second-quarter Kitchen and Bath Market Index (KBMI) report. Each quarterly index examines current kitchen and bath industry demand, future expectations, and issues that industry professionals face in their businesses answered through a set of questions rated on a scale of 0-100. Overall, the most recent findings from the KBMI report were solid at 65.7, despite dropping a few points from Q1 (71) and Q4 2018 (69.2). Although any score above 50 means the industry is on the right track, there remains room for improvement that the NKBA is keeping a close eye on.

The most prominent challenges the industry faces include lack of skilled labor, cost of materials, and trade issues. Several designers noted the impact tariffs have had on driving up the price of materials. One designer even reported a loss of about $150,000 in sales because of them. The luxury market has also started to slow down, and clients are looking for more affordable options to outfit their homes. Designers are turning towards cost-effective brands to help drive sales, despite fear that it could hurt their reputation. Manufacturers are also facing the same increasing labor and material costs and are expressing a need to drive operating efficiencies to improve their financial position.

As a direct result of the higher cost of labor and materials, customers have increased their spending within the past year, the report states. Some are even opting to take on smaller projects instead. A 4.7 percent full-year sales growth is expected in 2019, which is slightly down from 5.4 percent last quarter.

For building and construction companies, attaining skilled subcontractors has proven to be a challenge, and as a result, has limited the number of projects they are able to take on. Retailers and sales professionals have reported flattening real estate values, economic uncertainty and higher product costs as reasons for clients’ lack of urgency and lower budgets. Brick and mortar retailers specifically noted the competition they face in e-tailers which has led to several companies adopting new business models.

“This understanding of the health of building/construction, manufacturing, design and sales in the kitchen and bath sector provides additional context through which to view macroeconomic trends and directions,” said Todd Tomalak, Senior Vice President of Research for John Burns Real Estate Consulting.

Looking ahead, participants reported a brighter future for the industry (69 index reading) compared to the current conditions (63 index reading). More than half of experts (53%) are predicting sales growth in Q3 with an even larger number of manufacturers (63%) foreseeing growth this year.

“As the leading trade association and advocate for the kitchen and bath industry, one of NKBA’s goals is to arm our members with market insights, as well as to raise awareness about impactful industry challenges,” said Bill Darcy, NKBA CEO. “Although NKBA members are still optimistic about current and future kitchen and bath business conditions, there are signs of changes in the marketplace that we are monitoring closely.”