(Adds details of sales data, political context)
SAO PAULO, Aug 14 (Reuters) - Retail sales in June fell, unexpectedly, by the most in two years as commerce in Brazil wound down during the soccer World Cup hosted by the country, compounding an economic slump ahead of October elections.
Sales volumes fell 0.7 percent in June from May, government statistics agency IBGE said on Thursday.
The drop surprised most economists, who had expected retail sales to rise 0.4 percent, according to the median forecast of 24 economists polled by Reuters. Estimates ranged from a decline of 0.7 percent to an increase of 0.9 percent.
"The World Cup was a flop," said Ricardo Patah, president of the retail workers union in Sao Paulo, in a recent interview. "There's been no rebound since. Sales have been really awful."
It was the biggest monthly decline in the seasonally adjusted sales index since a 0.8 percent drop in May 2012.
Plunging demand added to concerns of an economic recession in Latin America's largest economy, challenging President Dilma Rousseff's re-election bid. Rousseff's polling lead has slipped in recent months, raising the odds of a runoff.
June sales fell in every category measured by IBGE except for food and beverages, reflecting a widespread slowdown as the World Cup tournament, which ran from June 12 through July 13, brought host cities to a standstill on game days.
Retail sales rose 0.8 percent from June 2013, the IBGE added, less than the 3.5 percent median estimate in the Reuters poll. Economists had estimated a gain of between 0.8 percent and 4.8 percent. (Reporting by Brad Haynes and Silvio Cascione; Additional reporting by Rodrigo Viga Gaier and Felipe Pontes in Rio de Janeiro; Editing by Bernadette Baum)