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Retail's Bad News — and Some Bright Spots

Retail sales disappoint, but some bright spots. May retail sales reports, down 1.2 percent versus consensus of 0.2 percent, were clearly a disappointment.

The bad news:

1) home improvement (building materials) down 9.3 percent from April, far worse than expected.

The expiration of the homebuyer tax credit is probably a factor, as is the expiration of the government credit for for appliances

Home Depot and Lowe's both down 1.3 percent — there is a little nervousness that home improvement is not accelerating.

2) Department store sales were down 1.8 percent, so JCPenney and others down 1 percent but off their lows.

Bright spots:

1) consumer electronics were good: up 0.6 percent from April (up 5 percent compared to April last year!) , Best Buy is up 1.5 percent and will report earnings next week.

2) Furniture and home furnishings were UP 1 percent from April, so Ethan Allan is up over 1 percent.

What's clear is that analysts who began taking down estimates after the disappointing May same store sales were moving in the right direction, though it still isn't clear how much June is being affected.

Why did retail sales diverge from same store sales that were already out? Home improvement, pet food and grocery chains do not report monthly. And remember Wal Mart does not report retail sales.

One thing clear: retail sales are a bit more volatile than expected, and we really won't have a strong bead on what is going on until we get August and September back to school data.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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