* Sales volumes grow 1.4 pct from June vs 1 pct forecast
* Domestic demand supports outlook for recovering growth
* Office supplies, apparel leading sales growth
SAO PAULO, Sept 13 (Reuters) - Brazilian retail sales grew more than expected in July for the second straight month as domestic demand supported an incipient recovery in the world's sixth largest economy.
Retail sales volumes in Brazil rose 1.4 percent in July from June, government statistics agency IBGE said on Thursday, above the median forecast of 1.0 percent growth in a Reuters poll of 26 economists.
Latin America's biggest economy has relied on its vast consumer market to avoid a recession over the past year. Low unemployment and government tax breaks have also boosted sales of automobiles and home appliances in recent months.
The government's stimulus and improving credit conditions appear to be taking hold after a consumer slowdown late last year, BNP Paribas economist Gustavo Arruda told clients.
"Looking forward, we expect retail sales to pick up further," Arruda said in a note on Thursday. "Recent data seem consistent with our view that growth is picking up, and the economy will finish 2012 better than it started the year."
The rising optimism reinforces impressions that Brazil's central bank is very near to the end of an easing cycle that cut borrowing costs to a record low over the past year.
The central bank cited recovering domestic demand and a jump in food prices in minutes from the meeting this month arguing that any additional interest rate cuts should be done with "maximum" caution.
Forecasts for monthly retail sales growth in July ranged from 0.0 percent to an increase of 1.9 percent.
Office supplies led sales growth in July after a sharp June drop and apparel sales picked up for the second month in a row.
Revised data showed sales volumes grew 1.6 percent in June from the prior month, up from a previously reported 1.5 percent.
July's retail sales rose 7.1 percent from the year-earlier period, the IBGE added, slightly more than the 6.9 percent median estimate in the Reuters poll. Forecasts ranged from a gain of 5.0 percent to a rise of 10.0 percent.