SAO PAULO, Sept 13 (Reuters) - Brazil's economic activity contracted less than expected in July as strong retail sales offset a sharp decline in manufacturing, bolstering hopes that the economy can avoid a quarterly drop.
The central bank's IBC-Br economic activity index declined a seasonally adjusted 0.33 percent in July from June, the bank said on Friday. The median estimate in a Reuters survey of 21 analysts was for a decline of 0.9 percent.
Most economists see Brazil's economy set to stumble in the second half of the year after short-term stimulus triggered an unexpected surge from April to June. The IBC-Br index is seen as a proxy for gross domestic product data.
July's data suggests that decline will not be as sharp as expected previously, though.
Retail sales rose 1.9 percent in July, the strongest month since January 2012, as food prices posted a rare decline in the month. A new program of tax breaks also boosted home appliance sales.
Strong consumption offset dismal industrial output in July. Production shrank 2 percent from June as waning business confidence hurt demand for capital goods.
The IBC-BR index is a gauge of activity in the farming, industry and services sectors. Without seasonal adjustments, it rose a non-seasonally adjusted 3.38 percent in July over the same month a year ago.
(Reporting by Silvio Cascione Editing by W Simon) Keywords: BRAZIL ECONOMY/ACTIVITY
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