UPDATE 1-Brazil retail sales up in March, cap weak first quarter

BRASILIA, May 11 (Reuters) - Retail sales in Brazil rose in line with expectations in March, capping a weak first quarter with more evidence that the economic recovery hit a bump at the start of the year.

Retail sales rose 0.3 percent from February, government statistics agency IBGE said on Friday, matching the median estimate in a Reuters poll of economists.

Though an improvement over the 0.2 percent contraction seen the month before, the result brings first-quarter growth to 3.8 percent from a year ago, softer than the prior three quarters.

The weak demand highlights how double-digit unemployment rates are keeping a lid on Brazil’s recovery from the deepest recession in decades despite record-low interest rates.

“Formal employment would give workers access to funding, which would allow them to purchase furniture and electric appliances,” IBGE economist Isabella Nunes said.

Accordingly, sales of furniture and appliances rose a paltry 1.7 percent in the first quarter, down sharply from 11.3 percent growth in the prior quarter.

Supermarket and household good sales accelerated, mostly due to the Easter holiday in March, Nunes said. Easter last year was celebrated in April.

Weak retail sales should keep the central bank on track to cut interest rates once again next week to an all-time low as it seeks to bolster the sluggish economic recovery.

Retail sales rose 6.5 percent in March from the year before, above an estimate of 5.5 percent in the Reuters poll. (Reporting by Bruno Federowski; Editing by David Gregorio)