BERLIN (Reuters) - German retail sales bounced back in May after falling for two consecutive months, data showed on Thursday, giving some reassurance that consumer spending will continue to propel growth in Europe's largest economy as foreign demand weakens.

Retail sales grew by 0.9 percent in real terms on the month, the Federal Statistics Office said. Economists polled by Reuters had expected a slightly weaker rise of 0.7 percent.

In another positive sign for domestic demand, the data for April was revised up to a decline of only 0.3 percent from a previously reported fall of 0.9 percent.

On the year, retail sales rose by 2.6 percent in real terms, compared with an upwardly revised increase of 2.7 percent the previous month. Economists polled by Reuters had expected a rise of 3.0 percent in May.

In the less volatile period from January to May, retail sales jumped by 2.0 percent in real terms compared with the same period in 2015, the office said.

The data came after a survey showed on Wednesday that German consumer morale reached its highest level in nearly a year heading into July, indicating that private consumption is likely to support growth in Europe's biggest economy over the summer.

The spending power of German consumers is currently boosted by record high employment, rising real wages and ultra-low borrowing costs, making domestic demand the most important growth driver.

(Reporting by Michael Nienaber; Editing by Caroline Copley)