In a post-industrial society, the consumer reigns supreme. In the United States the consumer drives 70% of our economy. No wonder everyone wants to know our attitudes to predict our mood about what we are doing with our money.

If we are optimistic that we are employed and going to stay that way, we are more likely to open our wallets for big ticket items like a new car, auto or major appliances for our homes. We might take a road trip or a cruise and if we are feeling really flush we buy a fancier car, a bigger house or take the whole family on vacation.

If we are gloomy about the future, we tend to be more cautious in our commitments across the board. For the first time in 50 years, inflation is running rampant and beginning to affect all our purchase decisions. Now that the Federal Reserve has begun to aggressively address inflation by raising interest rates rapidly in a short period of time, the cost of doing any of the things listed above is made even higher if you are buying it on credit.

I’ve recently discussed at length the issues around real estate in a period in which interest rates on a home mortgage are rising rapidly from just over 3% three months ago to over 6% now. Higher rates severely curtail the amount you can pay for a new home and keep your payments reasonable. As intended, rising rates are rapidly cooling the overheated housing market. The number of new home sales for this cycle peaked in December at 839,000. Here are the numbers for the intervening months: Jan. 831,000, Feb. 790,000; March 707,000; April 604,000; May 642,000 and June 590,000. Even before the Fed began raising rates in the spring, buyers were beginning to balk at the prices asked and began to step away from entering a contract.

This week Pulte Homes announced an increase to 15% in cancelled contracts, twice its normal level. The months supply of homes for sale has finally ticked up to 9.3 months from 8.4 months in May, a more subtle change. We know that lumber prices peaked in 2021 near $1,700 per thousand board feet and now are trading at $556 as demand has softened. Anecdotally we know that new home listings are suddenly lucky to get four to six lookers and even one bid out of the lot. The days of overbidding wars seems to have abruptly ended.

On the retail front, Walmart plans to report its Q2 earnings on Aug. 18. That’s why WMT took everyone by surprise when it pre-announced a grim Q2 after the close of trading on July 25. Walmart is the nation’s largest retailer and its offerings encompass every product category including food and gas. Inflation in double digits is altering shopping patterns among its customers. As they are being forced to spend far more of their weekly budget on those essentials, consumers are pulling back from other purchases. It acknowledged, much as Target did a few weeks ago, that it had the wrong inventory in stock and was being forced to take major markdowns to clear out those goods.

The companies that are doing just fine seem to be those like Coca-Cola and McDonald’s that are able to ruthlessly pass along cost increases to their customers and are doing so. What is interesting to underscore is that many companies are reporting grim result and yet their stocks are not falling by much. The distinguishing characteristic is the tens of billions of dollars the stalwarts have in the bank to weather an economic downturn. Pandemic beneficiaries like Peloton, Coinbase and Shopify are cutting personnel and trying to figure out a path forward. In contrast, their stocks are or have been imploding as they grapple with falling sales.

Joan Lappin CFA has been called an “investment guru” by Business Week and a “top manager” by the Wall Street Journal. The Sarasota resident founded Gramercy Capital Management, a registered investment adviser, in 1986. Email JLappincfa@gmail.com. Follow her on twitter: @joanlappin. Her past columns appear at heraldtribune.com/business/columns.

This article originally appeared on Sarasota Herald-Tribune: JOAN LAPPIN: Consumers reign. But there's unhappiness in the realm