* U.S. Q3 GDP raises concern about fourth-quarter growth
* Market surprised by ECB rate cut
* October nonfarm payrolls, due Friday, could influence Fed outlook
By Ellen Freilich
NEW YORK, Nov 7 (Reuters) - Prices for U.S. Treasuries rose on Thursday on a surprise rate cut by the European Central Bank and concern about future U.S. economic growth.
U.S. growth picked up in the third quarter, but slower growth in consumer spending during the period suggested the economy could be losing momentum.
Inventory gains accounted for 0.8 percentage point of the 2.8 percent growth, suggesting third-quarter growth could evolve to slower growth in the fourth quarter.
"Third-quarter GDP borrowed some growth from the fourth quarter due to the buildup in unsold inventories which is not a sustainable source of growth; and we had an unexpected ECB rate cut," said Jake Lowery, Treasury trader and portfolio manager for global interest rates at ING U.S. Investment Management in Atlanta, with $190 billion in assets under management.
The ECB cut interest rates to a record low on Thursday, saying it could take rates even lower to keep the euro zone's recovery from stalling as inflation tumbles.
Bond prices also benefited from "follow-through from the broader trend in U.S. rates this week which has been a reaction to some dovish conclusions reached by two prominent members of the Federal Reserve's research staff," Lowery said.
In new research papers to be released this week, two of the Fed's top staff economists made a case for more aggressive action by the U.S. central bank to drive down unemployment by promising to hold interest rates lower for longer.
That argument has driven a rally in Treasuries this week, particularly in five-year maturities, Lowery said.
Five-year Treasuries rose 4/32 on Thursday, leaving their yields at 1.31 percent, down from 1.34 percent late on Wednesday and from 1.39 percent late last week.
For Treasuries, soft third-quarter consumer spending - a 1.5 percent expansion rate, the slowest since the second quarter of 2011 - was seen as likely to keep the Fed from trimming its bond purchases this year.
"The Fed knows the calculation behind GDP and they will see the moderating trend, which is weaker than what the headline suggests," said Sam Bullard, a senior economist with Wells Fargo Securities in Charlotte, North Carolina.
Prices of U.S. benchmark 10-year Treasury notes rose 10/32 in price as their yields eased to 2.605 percent from 2.64 percent late on Wednesday.
The U.S. 30-year bond rose 1-5/32 in price as its yield fell to 3.71 percent from 3.77 percent on Wednesday.
A separate report on Thursday from the Labor Department suggested the job market continued to gradually improve.
Initial claims for state unemployment benefits fell 9,000 to a seasonally adjusted 336,000 last week. Economists polled by Reuters had expected first-time applications to fall to 335,000.
Investors will get more information on the labor market on Friday, with the release of October nonfarm payrolls figures. Those data are key for the U.S. Federal Reserve.
Economists polled by Reuters estimated non-farm payrolls likely grew by 125,000 jobs in October while the unemployment rate rose to 7.3 percent.
The payroll figures were likely muddied by the 16-day federal government shutdown in the first half of October, when Congressional Republicans sought to undermine President Barack Obama's healthcare law as a condition of funding the government.