UPDATE 1-Brazil auto sales up in May

* Car sales rebound in May after sharp drop in April

* Output rises vs. April 2009, plunges from a year ago

* Fiat remained Brazil's best-selling brand in May (Recasts, adds breakdown of sales by automaker)

By Alberto Alerigi

SAO PAULO, June 4 (Reuters) - Automobile sales in Brazil rose 5.4 percent in May from April, rebounding after a sharp decline the previous month, another sign consumer demand is recovering from its worst tumble in almost two decades.

Sales increased 2.1 percent from May 2008, to 247,000 units, national automakers' association Anfavea said on Thursday. Automobile output rose 6.7 percent month on month in May, but dropped 7.7 percent from a year earlier to 270,200 units.

Brazil, Latin America's largest economy, is a major market for global automakers such as Italy's Fiat SpA (FIA.MI: Quote, Profile, Research), Germany's Volkswagen AG (VOWG.DE: Quote, Profile, Research), U.S.-based General Motors Corp GMGMQ.PK and Ford Motor Co (F.N: Quote, Profile, Research).

Fiat led Brazil's automobile sales in May with 60,619 units, up 4.1 percent from April. Volkswagen was second, with 55,779 vehicles, up 5.6 percent, in the same period. GM ranked third with 47,881 units, a 17.9 percent surge from April, according to Anfavea. Ford sales fell 6.7 percent to 22,504 in May from April.

Asian and French manufacturers are also increasingly relying on Brazil to offset slumping sales at home.

The national dealers' association, Fenabrave, said this week that new car, truck and bus sales in Brazil grew 5.4 percent in May from April. (Writing by Guillermo Parra-Bernal and Elzio Barreto; Editing by Andre Grenon)