Consumers are not consuming, and retailers, along with related exchange traded funds (ETFs), are taken aback by this sudden change in behavior.

Lower Sales. Retailers have already warned of lower sales and profits for the months ahead as unsatisfactory sales reports from previous months’ reveal lower consumer spending, Miguel Bustillo and Kelly Evans report for The Wall Street Journal. Take heart, though: there are eight things we’re still buying.

Fears Are Pervasive. The United States lost 1.9 million jobs in November and another half-million in December, which has raised unemployment rate to around 6.7%. The Fed has announced that consumer credit dropped 3.7% to $2.6 trillion in November, the largest percentage drop in a decade. No wonder people are reluctant to spend.

Consumer spending, which accounts for three-quarters of U.S. growth, has been greatly curtailed because of the effects of Wall Street, unemployment and lack of access to credit. Consumer confidence has also reached its lowest point since the Conference Board first started to track it.

Bracing for Worse. Sales in retail diminished by 1.7% in December from a year before and holiday sales dropped 2.2%. It is estimated that around 1.1 million U.S. retail stores may shrink 3% to 4% in 2009 and small businesses could go out of business altogether.

• SPDR S&P Retail (XRT): up 6.2% in the last week; up 9.3% in the last month

• Retail HOLDRs (RTH): up 1.8% in the last week; down 1.4% in the last month

Tags: Retail, RTH, Sector ETFs, XRT