(Recasts, changes dateline, adds wider retail index and background)
BRASILIA May 15 (Reuters) - Retail sales in Brazil dropped unexpectedly in March as rising food prices and interest rates ate into consumers' pockets, government data showed on Thursday, in the latest sign of weak economic growth in the first quarter.
Retail sales volumes in Brazil fell 0.5 percent in March from February, the government statistics agency IBGE said. Sales had been expected to rise 0.1 percent, according to a Reuters poll of 27 economists.
Seven out of 10 retail activities surveyed had weaker sales, including supermarket and grocery sales, which declined 1.0 percent, and fuel, which dropped 1.5 percent.
Slower wage growth and tighter credit have helped push consumer confidence to a nearly five-year low, dragging on economic growth as President Dilma Rousseff gears up her re-election campaign this year.
March retail sales were off 1.1 percent from the year-earlier period, IBGE added, below all forecasts in the Reuters poll.
The annual drop was partly caused by the Carnival holiday that came in March rather than February this year. Sales in Rio de Janeiro were particularly affected, with a drop of 5.7 percent from March 2013 despite the arrival of about 1 million tourists for the parades and block parties.
A wider index of retail sales from the IBGE that includes the automotive and construction industries fell 1.2 percent in March from February due to weaker car sales. The wider index slid 5.7 percent from March 2013. (Reporting by Rodrigo Viga Gaier; Writing by Silvio Cascione; Editing by W Simon and Jeffrey Benkoe)