* IBC-Br drops 0.31 pct in November from October
* Weak economy defies central bank's push against inflation
By Silvio Cascione
BRASILIA, Jan 17 Economic activity in Brazil contracted more than expected in November despite a surge in retail sales, throwing cold water on hopes of a modest recovery from a third quarter slump.
The Brazilian central bank's IBC-Br economic activity index declined 0.31 percent in November from October in seasonally adjusted terms, the bank said on Friday. The median estimate in a Reuters survey was for a decline of 0.1 percent.
Brazil's faltering economy raises the stakes for policymakers, who have been struggling to tame stubbornly high inflation.
The central bank lifted its benchmark lending rate earlier this week for a seventh straight time, but hinted it could soon slow or even halt the rate hikes to avoid further damage to economic growth.
Brazil's economy, which has stagnated over the past few years despite a string of government stimulus, contracted in the third quarter for the first time in four years as rising prices and dwindling business confidence weighed on investment .
Robust retail sales growth in November had fueled hopes of an uptick in economic activity for a second straight month. The improvement in commerce, however, was not strong enough to offset a small decline in industrial output.
The IBC-Br index, a gauge of activity in the farming, industry and services sectors, rose a non-seasonally adjusted 1.34 percent over the same month a year ago.