UPDATE 2-Brazil retail sales rise for 4th straight month in Sept
* Retail sales volumes grow 0.3 pct, as expected * Broader measure including cars slumped 9.2 pct * Data suggest economic activity down slightly By Silvio Cascione SAO PAULO, Nov 13 (Reuters) - Retail sales in Brazil rose for a fourth straight month in September at a modest pace, government data showed on Tuesday, reinforcing the idea of a slow economic recovery in Latin America's largest economy. Retail sales volumes in Brazil rose 0.3 percent from August , in line with the median forecast in a Reuters poll of 35 economists, after a 0.2 percent rise in August, according to data from the statistics agency IBGE. Sales grew 8.5 percent from the year before. Strong supermarket sales supported the expansion. However, a broader IBGE measure of retail sales that includes car sales slumped as the boost from temporary tax breaks on automobiles started to fade. Economists said the retail sales numbers are consistent with 1 percent to 1.5 percent growth in Brazil's gross domestic product in the third quarter over the previous one, accelerating from a 0.4 percent expansion in the second quarter. The third quarter probably ended on a weaker note, though, as economists see a drop in economic activity in September after industrial output contracted 1 percent. Preliminary forecasts taken before the retail sales data showed all 19 analysts surveyed expected a September drop in central bank's IBC-Br economic activity index, which may be released later this week. "The economy is still recovering. There are some doubts about the fourth quarter though, regarding the intensity of this movement," said Vladimir Caramaschi, chief economist for Brazil at Credit Agricole in Sao Paulo. "Early signs point to an expansion slightly lower than 1 percent in the fourth quarter." Alexandre Andrade, an economist at Votorantim Corretora, said retail sales should grow 0.8 percent in the fourth quarter, down from 2.3 percent in the third, as tax breaks offered by President Dilma Rousseff's government yield lower benefits. With manufacturers struggling to compete in a weak global economy, hopes of a sustained recovery in the world's sixth-largest economy have rested on its nearly 200 million consumers. The Brazilian economy is expected to grow by 4 percent in 2013, accelerating from a 1.5 percent expansion forecast for this year, after the central bank cut benchmark interest rates to a record-low 7.25 percent. Finance Minister Guido Mantega said late on Monday that Brazil's economy probably expanded at annualized rate between 3.5 and 4 percent in the third quarter. Taking into account automobiles and building materials, retail sales in Brazil slumped 9.2 percent from August, the sharpest drop since the data series began in 2003, but rose 2 percent from the same month a year before. Car sales recovered in October, but remained below their August peak, national automakers' association Anfavea said last week. "Car sales have been strongly up and down in recent months as the tax cut pushed sales, temporarily, towards a higher level. These effects, however, should not last," said Alexandre Schwartsman, a former central bank board member and partner of Schwartsman & Associados, in a research note. Supermarket, food and tobacco sales grew 0.9 percent from August and led the index up. Only four out of the 10 sectors covered by IBGE reported rising sales in September from the previous month. Retail sales volumes grew 8.9 percent in the nine months through September compared to the same period of 2011. Year-on-year growth in August was revised down to 10.0 percent after a previously reported 10.1 percent. Nominal revenue, without adjustments for inflation, grew 1.0 percent from August and 12.9 percent from a year before.