Consumer spending, or the lack thereof, continues to be a thorn in the side of the economic recovery effort. Shoppers kept their wallets shut in July, but that doesn’t mean you have to avoid retail exchange traded funds (ETFs) altogether.

Consumer spending is a huge indicator of the health of the U.S. economy, so it is studied closely.

For the month of June, consumers were feeling secure enough to spend some money even as their incomes dropped, according to the Associated Press. June’s rise in spending came as the average income fell 1.3%, the largest decline in four years. Wages and salaries fell 0.4% in June from May, the eighth straight monthly drop. One theory suggests that the jump in spending came from government subsidies that drove up new car and home sales.

In July, that wasn’t the case, as retailers reported sluggish sales.

Karen Tally for The Wall Street Journal says that July’s decline is the 11th consecutive month in which comparable store sales declined. Even discount stores are anticipating a 6.1% drop in sales.

Consumers for the most part appear to be sticking with the necessities and hunting down values, making consumer staples ETFs appealing. Their top components are a mix of brands that provide staple items such as toothpaste and household cleaners (Colgate (CL), Procter & Gamble (PG)) as well as value-oriented retailers (CVS (CVS), Walgreen’s (WAG)).

• Consumer Staples Select Sector SPDR (XLP): up 3.7% year-to-date

• Vanguard Consumer Staples ETF (VDC): up 5.6% year-to-date

For more stories about consumer staples, visit our consumer staples category.

Tags: Consumer Staples, Retail, Sector ETFs, VDC, XLP