Retail sales in September continued to show that consumers aren’t ready to splurge, and related exchange traded funds (ETFs) aren’t ready to perform.

The 1.2% drop in sales was even worse than expected, and was the largest plunge in three years, reports Martin Crutsinger for the Associated Press. Economists had been expecting a 0.7% decline. The last time retail sales declined so much was in August 2005, when they fell 1.4%.

Auto sales led the weakness, falling 3.8% on difficulties of finding financing. This is the first time sales have fallen for three consecutive months since the government started keeping records in 1992.

Wholesale prices also declined for a second straight month, by 0.4%. Core wholesale prices, which exclude food and energy, rose by 0.4%, which was double what economists expected.

Businesses increased their inventories by the smallest amount in five months, signaling concerns about the slowing economy. Inventories rose by 0.3% in August, the weakest gain since March.

Oil prices have dropped to their lowest point in 13 months, thanks to expectations that a continuing weak economy will crimp crude demand, says Ikuko Kao for Reuters. Crude was down to $74.87 a barrel this morning.

• SPDR S&P Consumer Discretionary (XLY): down 28.6% year-to-date; down 25.6% in the last month (black line)
• Retail HOLDRs (RTH): down 19.3% year-to-date; down 23.4% in the last month (green line)

Tags: Energy, Green ETFs, Oil, Retail, RTH