[Delray Beach, Fla.] Catalina Research has released its latest Kitchen and Bath Product Quarterly Update.

According to the update, U.S. kitchen and bath product manufacturer sales were sluggish in 2019 due to the housing recession between mid-2018 and mid-2019, a reaction to the Federal Reserve raising interest rates. Housing demand, however, began to recover in the second half of 2019 as the Federal Reserve reversed course and lowered rates. By the time we entered 2020, housing demand and homeowner spending on remodeling projects was about to take off. In the first two months of 2020 housing starts soared, increasing 35.4 percent. Existing home sales also increased at double-digit rates in early 2020. The rebound in existing home sales resulted in homeowner residential improvement spending increasing more than 20 percent over the first two months of 2020. And then the country was shut down.

Currently, manufacturers, retailers and contractors are shutting down in response to the spreading coronavirus. The lockdown in most of the country is expected to cause housing demand to decline by double-digit rates in the second quarter of 2020, while manufacturer kitchen and bath product sales could decrease at an even sharper rate. Based on daily reports, this weakness could extend into the third quarter.

Once the reins are taken off the economy and consumers regain confidence, kitchen and bath product demand is expected to spring back. Historically low interest rates should give a boost to housing demand, and we expect housing sales to resume double-digit growth rates. Households may also begin to trade up to a larger dwelling if they determine they need more work-at-home space. In addition, non-movers may be motivated to invest in their homes since they will put off vacations and could also limit visits to restaurants or attending sporting and entertainment events. On the other hand, homeowners will definitely be ready to spend on home improvements after spending weeks and months looking at their old kitchens and bathrooms.

A fourth quarter recovery, however, will not offset the declines in the second and third quarters. As a result, industry sales could decline at the sharpest rate since 2009, the year of the financial crisis. A full recovery is not expected to begin until 2021.

Any upturn in manufacturer sales will provide opportunities for U.S. producers. Chinese manufacturers have already lost share in 2019 and early 2020 due to the imposition of the 301 tariffs on Chinese-made flooring by the Trump administration, as well as countervailing and antidumping duties placed on cabinet and quartz countertops (the Administration has recently put off collections of some tariffs during the current crisis). In 2019, Chinese kitchen and bath product shipments in the United State declined by 20.5 percent and dropped by more than 25 percent in early 2020. Some of the decline in shipments from China was made up from producers located in Malaysia, South Korea, Spain, Taiwan and Vietnam. However, overall import shipments have been declining by 5.2 percent in 2019 and early 2020.  On the other hand, shipments originating from domestic plants was increasing 2 percent to 3 percent over this period.

U.S. manufacturers of cabinets and quartz countertops are expected to benefit from the sharp drop in Chinese imports due to the imposition of countervailing and antidumping duties. U.S. producers of plumbing fixtures and faucets could receive a boost from the growing importance of these product lines.

For more from Catalina Research including Floor Coverings Quarterly Updates, visit www.CatalinaReports.com