ETFs and Consumer Spending in Retreat

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U.S. consumers seem to be reluctant to open their pocketbooks and the impact is showing in the numbers and in the weak performance of exchange-traded funds that track consumer spending such as the iShares S&P Global Consumer Discretionary Sector ETF (NYSEARCA:RXI).

“The consumer is retreating,” said Richard Berner, chief US economist at Morgan Stanley stated in a Financial Times article. “It is too soon to say cracking, but the consumer is clearly turning cautious at the very least.”

Seasonally adjusted retail sales fell by 0.4 per cent in December, according to the commerce department. Excluding volatile purchases of automobiles and parts, sales were also down by 0.4 per cent, more than the market had expected.

October and November sales were also both revised down, though the November figure remained very strong. Retail sales for all of 2007 grew at the slowest pace for five years. The sales data come hard on the heels of the December jobs market report, which showed that unemployment jumped to 5 per cent.