* IBC-Br index up 0.08 pct from July vs 0.2 pct forecast
* Retail jumps, strong Sept jobs support fragile economy
BRASILIA, Oct 16 (Reuters) - Economic activity in Brazilbarely increased in August from July despite a surprise jump inretail sales, suggesting the overall economy likely struggled toexpand in the third quarter.
The Brazilian central bank's IBC-Br economic activity index rose a seasonally adjusted 0.08 percent in Augustfrom July, the bank said on Wednesday, missing the mediananalysts' estimate of 0.2 percent growth in a Reuters survey.
"With this outcome... we are maintaining for now our expectation of a slight retraction at the margin of theBrazilian economy in the third quarter," Brazilian bank Bradescosaid in a note to clients.
Still, an unexpected surge in formal job creation inSeptember, reported separately on Wednesday, suggested a reboundin consumer spending may continue to support Latin America'slargest economy in the second half.
After accelerating in the second quarter, the Brazilianeconomy is struggling to maintain steady growth as persistenthigh inflation hurts industrial competitiveness and keepsinvestors on edge.
President Dilma Rousseff has blamed much of the economicwoes on global headwinds such as slower growth in China andswings in the local exchange rate.
Private economists point to supply bottlenecks such as afaulty infrastructure and high taxes as some of the main reasonsbehind a stretch of mediocre growth, now in its third year.
Deteriorating business confidence has dragged on employmentopportunities this year, with growth of payroll jobs runningbehind that of 2012, despite tax cuts and other industrialstimulus.
In September, however, Brazil's economy added a net 211,068payroll jobs, the labor ministry said on Wednesday,up from 150,334 a year earlier, and well ahead of the 148,000jobs estimated in a Reuters poll of economists.
It was the strongest job growth of the year, suggesting arobust labor market may keep household income healthy in theyear-end period crucial for retailers and support a fragilerecovery.
Retail sales jumped unexpectedly in July and August asconsumer confidence rebounded and inflation cooled atsupermarkets, which encouraged Brazilians to shop.
The central bank's economic index, a gauge of activity inthe farming, industry and services sectors, rose anon-seasonally adjusted 1.32 percent over the same month a yearago.
The bank revised its seasonally adjusted July versus Juneresult to a decline of 0.34 percent from a drop of 0.33 percent.
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