(Reuters) - U.S. economic growth slowed less than expected in the second quarter as a surge in consumer spending blunted some of the drag from declining exports and a smaller inventory build, which could further allay concerns about the economy’s health.

KEY POINTS:

** Consumer spending up 4.3% vs 1.1% in Q1

** Business investment down 0.6% vs up 4.4% in Q1

** Spending on structures down 10.4% vs up 4.0% in Q1

** Housing investment down 1.5% vs down 1.0% in Q1

** Government outlays up 5.0% vs up 2.9% in Q1

** Exports down 5.2% vs up 4.1% in Q1

** Imports up 0.1% vs down 1.5% in Q1

MARKET REACTION:

** STOCKS: S&P 500 e-mini futures ESv1 briefly pare gains but still point to gains at the Wall Street open [.N]

** BONDS: 2- US2YT=RR and 10-year US10YT=RR Treasury yields tick higher [US/]

** FOREX: The dollar index .DXY edges up, gaining ground against both euro EUR= and yen JPY=

COMMENTS:

ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES, NEW YORK:

“This is slightly better than expected but certainly not enough to change the path of the Fed meeting by the end of this month.

“This is just what the market needed, not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course. It shows that the economy is slowing but not nearly enough to raise any red flags.

“This is still good news because a stronger economy translates to stronger earnings and since we are already in the second quarter, we can now see that earnings reports have been getting better. We expected bad earnings and bad GDP numbers but an upside on both is something markets are going to embrace today.”

ERIK NELSON, CURRENCY STRATEGIST, WELLS FARGO SECURITIES, NEW YORK:

“The details of the GDP report were pretty solid across the board. In terms of impact on FX -- one of the things we have emphasized before is that growth has become an important driver of FX rates. You continue to see this theme that the U.S. is growing well, better than most G7 economies, consistent with dollar strength that we’re seeing on the back of this. It’s not substantial though. I don’t think it changes all that much for the Fed next week. We still expect a 25 basis-point cut at the meeting.”

AARON ANDERSON, SENIOR VICE PRESIDENT OF RESEARCH, FISHER INVESTMENTS, WOODSIDE, CALIFORNIA:

“I would call this a very encouraging report, at least it reinforces the idea the economy is on a more stable footing than people have been worrying about recently. Obviously this is a little bit of economic deceleration from last quarter, and that should be the story of this whole year. The economy does slow down a little bit, but not to such a degree that it puts us at risk of a near-term recession. Otherwise it’s pretty stable with low inflation and that’s not a bad thing.”

“As I go down through the core components it looks pretty encouraging. You had decent growth in personal consumption. You had some weakness in business spending. It looks like this is the first negative number we’ve had in gross private domestic investment. But most of that’s tied to inventory, things like structures. Most of the other components look positive to me particularly if you’re looking at intellectual property, those kinds of things.”

STEPHEN STANLEY, CHIEF ECONOMIST, AMHERST PIERPONT SECURITIES, STAMFORD, CONNECTICUT:

“Given we have benchmark revisions, the numbers are pretty close to expectations. The basic story is that in the first half, the economy grew at 2.5%, which is comfortably above trend. On the other hand, the core PCE came in lower-than-expected, which continues the theme whether low inflation is transitory and is running below target. The data don’t really show the degree of slowdown that people are worried about.

“The Fed is obviously easing due to downside risks. I’ll be surprised if the Fed will signal next week they are entering into an easing cycle. They will take it move by move. They are going to bolster the economy to counter the downside risks from trade. The bar for easing is lower because they are not concerned that inflation is getting too high.”