HONG KONG, Aug 17 (Reuters) - Hong Kong's economy expanded a seasonally adjusted 2 percent in the second quarter from the previous quarter, data showed on Friday, its best performance since the third quarter of 2006 as consumers went on a spending spree and exports held up well.

Second-quarter economic growth compared with a revised 0.6 percent expansion in the first quarter and beat forecasts for a 1.4 percent rise.

The government lifted its forecast for economic growth in 2007 to 5-6 percent, from 4.5-5.5 percent, and in line with economists' forecasts. That would be much slower than average annual growth of 7.7 percent over the past three years.

Gross domestic product in the second quarter rose 6.9 percent from the year-ago period, the government said. That was above forecasts for a 6.1 percent increase up from a revised 5.7 percent increase in the first quarter.

Economists expect exports to slow because of weakening demand from the United States -- the territory's biggest export market after China. China's booming economy, however, is boosting investment in Hong Kong and creating demand for services. That will provide some cushion if a weakening U.S. economy spurs a global slowdown, analysts say.

Private consumption expenditure in the second quarter rose 2.8 percent on a seasonally adjusted quarterly basis, accelerating from a 2.2 percent increase in the first quarter).

A weak Hong Kong dollar and rising food prices are adding to inflation, although price increases remain tame and the government maintained its forecast for a 1.5 percent increase in the consumer price index this year.

REUTERS