UPDATE 2-Canada May retail sales slide for second month

* Retail sales slide 0.2 pct, ex-autos sales dip 0.1 pct

* Sales decline in 6 of 11 retail sectors (Adds commentary, market reaction)

OTTAWA, July 22 (Reuters) - Canadian retail sales unexpectedly fell in May for the second straight month, led by a drop in building material and garden equipment supplies.

Total retail sales slid 0.2 percent in May from April, Statistics Canada said on Thursday. Excluding the auto sector, sales edged down 0.1 percent, while sales in volume terms rose 0.4 percent, following an upward trend since the start of 2009.

The median forecast in a Reuters poll was for a 0.4 percent advance in retail sales in May. Statscan revised April's month-on-month fall to 2.2 percent from an initially reported 2.0 percent decline.

Two of the largest declines in the month were at gasoline stations, down 2.3 percent, as prices fell at the pump, while the building material and garden equipment supplies sector fell 4.1 percent.

Given the drop in gasoline prices, some economists were quick to discount the headline number.

"This is a much better report than the headline suggests for two reasons," said Scotia Capital's Derek Holt and Gorica Djeric in a note to clients.

"First, the dollar value of retail sales, excluding autos and gasoline station sales, actually climbed 0.2 percent so it was gas prices that distorted the headline and the core sales measure that only subtracts autos."

They also noted that the decline in the dollar value of retail sales was all in price terms, as the volume of sales in fact increased four-tenths of a percentage point in May over April.

The Canadian dollar CAD=D4 initially softened after the report. The currency fell to C$1.0467 to the U.S. dollar, or 95.54 U.S. cents, compared with C$1.0413, or 96.03 U.S. cents immediately before the Statscan release.

Overall, six of 11 sectors posted lower sales.

Of the five sectors that registered gains in May, the largest increase was a 2.6 percent jump at clothing and clothing accessories stores. (Reporting by Ka Yan Ng and Claire Sibonney; Editing by Theodore d'Afflisio)