(Updates with report)
* U.S. third-quarter GDP increases at 1.9% rate
* Inventories, trade minor drags on growth
* Consumer spending decelerates; homebuilding rebounds
WASHINGTON, Oct 30 (Reuters) - U.S. economic growth slowed less than expected in the third quarter as declining business investment was offset by resilient consumer spending and a rebound in exports, which could further allay financial market fears of a recession.
The Commerce Department's report on Wednesday will, however, unlikely discourage the Federal Reserve from cutting interest rates again amid lingering threats to the longest expansion on record from uncertainty over trade policy, slowing global growth and Britain's departure from the European Union.
The Trump administration's trade war with China has eroded business confidence, contributing to the second straight quarterly contraction in business investment. The fading stimulus from last year's $1.5 trillion tax cut package is also casting a shadow on the expansion, now in its 11th year.
The GDP report was published hours before Fed officials wrapped-up a two-day policy meeting. The U.S. central bank is expected to cut interest rates for the third time on Wednesday. The Fed cut rates in September after reducing borrowing costs in July for the first time since 2008.
Gross domestic product increased at a 1.9% annualized rate in the third quarter, also as businesses maintained a steady pace of inventory accumulation and the housing market rebounded after contracting for six straight quarters, the government said in its advance estimate of GDP.
The economy grew at a 2.0% pace in the April-June period. Economists estimate the speed at which the economy can grow over a long period without igniting inflation at between 1.7% and 2.0%. Economists polled by Reuters had forecast GDP increasing at a 1.6% rate in the July-September quarter.
Despite last quarter's better-than-expected performance, the economy is expected to again miss the White House's ambitious goal of 3.0% annual growth this year. It grew 2.9% last year.
While President Donald Trump this month announced a truce in the trade war with China, delaying additional tariffs that were due in October, economists say growth remains in danger without all duties being rolled back. A Trump administration official said on Tuesday the interim trade agreement might not be ready for signing in Chile next month as expected.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed to a still-healthy 2.9% rate last quarter after surging at a 4.6% pace in the second quarter, the fastest since the fourth quarter of 2017.
Consumer spending is being powered by the lowest unemployment rate in nearly 50 years. But some economists are starting to question the resilience of the consumer after retail sales fell in September for the first time in seven months. Consumer confidence has also been trending lower and wage growth is stalling.
Business investment fell at a 3.0% rate in the third quarter, the sharpest contraction in more than 3-1/2 years, after falling at a 1.0% rate in the second quarter. It was pulled down by declines in spending on equipment and nonresidential structures such as mining exploration, shafts and wells. These reflected trade tensions, which have weighed on capital expenditure, as well as cheaper oil.
Design problems at aerospace giant Boeing have also hurt business investment. The world's largest planemaker last week reported a 53% drop in quarterly profit because of the grounding of its best-selling 737 MAX jets. The planes were pulled out of service in March following fatal crashes in Indonesia and Ethiopia.
The rebound in exports blunted a surge in imports, leading to a narrowing in the trade deficit. Trade subtracted a negligible 0.08 percentage point from GDP growth in the third quarter after cutting 0.68 percentage point in the prior period.
Business accumulated inventory at $69.0 billion pace in the last quarter after building stocks at a $69.4 billion rate in the April-June period. Inventories trimmed GDP growth by only 0.05 percentage point in the third quarter compared to 0.91 percentage point in the second quarter.
Government spending cooled after rising at its fastest pace in 10 years in the second quarter. Spending on homebuilding rebounded at a 5.1% rate after contracting for six straight quarters. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)