By Elizabeth Dilts Marshall

NEW YORK (Reuters) - World shares rose and the yield on benchmark U.S. Treasuries weakened on Friday after data showed that U.S. consumer spending rose in April and the uptick in inflation slowed, two signs the world's largest economy could be on track to grow this quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.9% last month, and although inflation continued to increase in April, it was less than in recent months. The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain November 2020.

The U.S. Federal Reserve, in minutes from its May meeting released earlier this week, called inflation a serious concern. A majority of the central bankers backed two half-of-a-percentage point rate hikes in June and July, as the group attempts to curb inflation without causing a recession.

The Fed did leave room for a pause in hikes if the economy weakens.

Analysts said the consumer spending and inflation data was encouraging and supported growth estimates for the second quarter that are mostly above a 2.0 annualized rate.

"The growth engine of the U.S. economy is still alive and kicking, and that's important," said Joe Quinlan, Head of CIO Market Strategy for Merrill and Bank of America Private Bank. "Growth estimates for (the second quarter) are still good. There is a better tone in the market than we have seen in recent weeks, in terms of inflation possibly peaking here. Maybe we can avoid stagflation."

The MSCI world equity index, which tracks shares in 45 nations, rose 1.78% at 2:50 p.m. EDT (1850 GMT).

Global equity funds saw inflows in the week to May 25 for the first week in seven, according to Refinitiv Lipper.

European shares hit a three-week high rose 1.42%. Britain's FTSE also hit a three-week high, and was heading for its best weekly showing since mid-March.

The Dow Jones Industrial Average rose 368.34 points, or 1.13%, to 33,005.53, the S&P 500 gained 75.33 points, or 1.86%, to 4,133.17 and the Nasdaq Composite added 319.75 points, or 2.72%, to 12,060.40.

The yield on benchmark 10-year Treasury notes was last 2.7432%. It had hit a three-year high of 3.2030% earlier this month on fears that the Fed may have to raise rates rapidly to bring inflation under control.

Lower yields shows the Fed's monetary policy is succeeding in tightening credit and slowing down prices, said BofA's Quinlan.

"The 10 year yield is suggesting we don't have to have inflation break above 9-10%," Quinlan said. "We are getting close to a peak in inflation."