Brazil retail sales fall for third straight month as high interest rates bite

SAO PAULO, Aug 13 (Reuters) - Retail sales volumes in Brazil fell 0.1% in June from May, official data showed on Wednesday, marking a third consecutive monthly decline as restrictive monetary policy weighs on economic activity.

Economists in a Reuters poll had expected an increase of 0.70% from the previous month. On a year-over-year basis, sales grew 0.3% in June, statistics agency IBGE said, also well below the 2.4% increase forecast in the poll.

Latin America's largest economy has been showing some signs of cooling amid high interest rates aimed at curbing persistent inflation.

The Brazilian central bank held rates unchanged last month after an aggressive tightening cycle that has added 450 basis points to its benchmark interest rate, bringing it to a near 20-year high of 15%.

Retail sales in the country have been slowing since March, when they hit their highest level on record, the statistics agency said, noting that this set a high base for subsequent months.

"Other factors that contributed (to the drops) include the contraction of credit and the resilience of inflation in the first half of the year, particularly in key items such as food consumed at home," research manager Cristiano Santos said.

Five out of the eight retail segments surveyed posted declines in June, the agency noted, mentioning sales at hypermarkets and supermarkets - which include food and beverage - as the main drag.

The June retail data confirm the sector is losing resilience, said Pantheon Macroeconomics' chief Latin America economist, Andres Abadia.

"Rising real incomes and a still-strong labor market are no longer sufficient to offset the drag from high borrowing costs and elevated uncertainty," Abadia wrote in a note to clients.