UPDATE 1-Brazil economic activity speeds up in first quarter
* Central bank's IBC-Br index rises 1.05 pct over Q4
* Economic activity rises 0.72 pct in March from Feb
* Index seen as early snapshot of forthcoming GDP data
SAO PAULO, May 16 (Reuters) - Economic activity in Brazil accelerated in the first quarter, central bank data showed on Thursday, adding to signs that a gradual recovery has gained steam after massive stimulus by President Dilma Rousseff's government.
The improvement happened even though retail sales, one of the main pillars of recent economic growth, had its weakest quarter in five years as inflation jumped. This suggests Brazil relied less on consumers and more on industrial output and private investments to expand recently.
The Brazilian central bank's IBC-Br economic activity index rose 0.72 percent in March from February in seasonally adjusted terms, the bank said on Thursday.
As a result, the index increased 1.05 percent in the first three months of the year, compared with the final quarter of last year, up from an expansion of 0.63 percent in the previous quarter.
For March's economic index activity number, the median estimate in a Reuters survey of 24 analysts, conducted before the government reported a slight drop in retail sales in March, was for a rise of 0.70 percent from February.
The index, a gauge of activity in the farming, manufacturing and services sectors, rose a non-seasonally adjusted 1.16 percent over the same month a year ago.
Industrial output increased 0.8 percent in the first three months of the year over the preceding period, slowly recovering from a long downturn as manufacturers took advantage of tax cuts and credit lines offered by the government, statistics agency IBGE data showed earlier this month.
Retail sales weakened in the meantime, though, undermining one of the few sources of growth in Latin America's largest economy. The volume of sales dropped 0.2 percent in the January-March period, the first decline since 2008.
The IBC-Br index is an early snapshot of major sectors comprising the gross domestic product, but it failed to anticipate very weak GDP growth in the third quarter of last year. Official first-quarter GDP figures will be released on May 29 by IBGE.