UPDATE 1-Mexico May retail sales up 3.4 pct, beat forecast

(Recasts, adds detail and background)

MEXICO CITY, July 22 (Reuters) - Retail sales in Mexico, whose economy is under pressure from a U.S. slowdown, rose a stronger-than-expected 3.4 percent in May, the government said on Tuesday.

Wholesale sales, often an indicator of future retail sales, expanded 3.6 percent in the month compared with May 2007.

Economists in a Reuters poll on average had forecast retail sales grew 2.46 percent in the month.

Purchases of domestic appliances, computers and interior decorations helped raise retail sales in May, government statistics agency INEGI said.

Mexico's economy is slowing as its top trading partner, the United States, goes through a sharp downturn. Industrial production, which makes up nearly 40 percent of the economy, slipped 1.2 percent in May.

Retail sales MXRSLY=ECI were up a scant 0.07 percent in May over April.

Employment in the retail sector was up 0.7 percent in May, year over year. (Reporting by Noel Randewich; Editing by James Dalgleish)