Westpac Economics Team provides its first take on today's Australian retail sales, up 0.2% in May, which is judged as a disappointing result.Key QuotesBoth Westpac and consensus had been for an moderately improved result given the RBA's surprise rate cut in May and an associated rally in consumer sentiment. The 0.2% gain along with a slightly weaker revised 0.1% gain in April and a poor 'mix' point to continued lacklustre demand most probably more aggressive price discounting among retailers.Annual growth in retail sales slowed to 3.4%yr, with the monthly trend tracking a materially weaker 2.2% annual pace.The store type category breakdown showed 'non-food' retail sales down 0.1%mth on a combined basis. Basic food retail sales rose 0.7%mth and 'cafes & restaurants' recorded a 0.3% gain. The gain in basic food may be a sign that the 'supermarket price wars' eased a touch in the month.However, it the broader pattern of weakness in 'discretionary' categories and gains in 'staples' may also be a sign that Australian consumers are reining in spending. Notable within the non-food categories was a 1.1% fall in household goods retail - a bellwether discretionary category that, given links to housing construction, should instead be seeing decent growth at the moment.The state split was particularly notable this month with the major non-mining states recording much better gains – NSW 0.7%mth, 4.9%yr; Vic 0.6%mth, 4.9%yr – and the mining states showing pronounced weakness – Qld –0.4%mth, 0.4%yr; WA –0.7%mth, 0.5%yr. The latter implies a material contraction in per capita sales over the last year.Note that the retail survey has been a problematic indicator for broader consumer demand in recent years. Nevertheless, the May update still constitutes a disappointing read and points to downside risks both to consumer spending and price inflation.