In this July 3, 2018, photo, a shopper carries bags in San Francisco.Retail trade sales increased by 1.9 percent year-on-year in May 2018 and 1.1 percent month-on-month in May. (AP Photo/Marcio Jose Sanchez)

JOHANNESBURG - FNB senior economic analyst, Jason Muscat, said on Wednesday that the May 2018 retail trade sales were a disappointing normalisation.

Statistics South Africa (StatsSA) had earlier reported that the May retail trade sales expanded 1.9 percent year-on-year and 1.1 percent month-on-month, somewhat unwinding the very weak April growth of just 0.5 percent year-on-year.

But Muscat said that the negative 0.1 percent change in the three months ended May was concerning as it suggested a weak second quarter contribution to GDP from the sector.

"While a post-VAT implementation rebound was anticipated, the data is still extremely weak against the backdrop of high wage settlements and well contained inflation, and it seems hopes of a consumption led economic recovery are fading," Muscat said.

"The data also suggests that consumers are reining in expenditure, likely in order to divert funds to rapidly rising transport costs. The weak retail sales print, and better than expected June inflation number supports our view that the South African Reserve Bank will keep rates on hold tomorrow."

StatsSA said general dealers, food and beverage stores and hardware retailers contracted 1.1 percent, 1.7 percent and 0.9 percent year-on-year, respectively, while pharma and cosmetic sales growth decelerated to 2.2 percent year-on-year from 6.1 percent in April.

Good news was that clothing sales recovered from April's 0.7 percent year-on-year contraction, recording 4.1 percent in May, while furniture sales continued their rebound, albeit off an extremely low base, growing 14.4 percent year-on-year.

- African News Agency (ANA)