UPDATE 2-Argentina growth beats estimates, boom goes on

* Argentina's economy grew 8.1 percent in May

* Expansion driven by grains exports, consumer spending

* Economy grew 9.2 percent in 2011

(Adds details, context, analyst comments, byline)

By Luis Andres Henao

BUENOS AIRES, July 18 (Reuters) - Argentina's economy grew 8.1 percent in May from the same month a year earlier, the government said on Monday, beating market expectations and showing a nearly two-year-long boom remains strong.

Argentina, Latin America's third-biggest economy, is growing at one of the region's fastest rates on the back of grain exports, strong consumer spending and industrial output.

Most economic analysts accuse the INDEC statistics agency of downplaying inflation and, to a lesser extent, of exaggerating industrial output and economic growth for political gain.

The data marked the 21st consecutive month of year-on-year growth.

"Although there are differences between the INDEC estimates and those of private consultancies, the reality is that the economy is growing significantly," said Nicolas Bridger of Prefinex consulting firm.

"There's greater consumer activity due to more credit being offered by banks, high global commodity prices and consumer spending growing by about 30 percent," Bridger said.

The EMAE economic activity index -- a close proxy for gross domestic product (GDP), which is reported quarterly -- rose 1.5 percent in May from April, INDEC said.

Analysts surveyed in a Reuters poll expected May's economic activity to rise 6.9 percent year-on year, according to the median. The EMAE registered 13.5 percent year-on-year growth in May 2010 ARECI14.

Argentina's deputy economy minister, Roberto Feletti, said last week the economy was on track to grow 8.2 percent this year, cooling from 9.2 percent growth in 2010.

Rapid growth is good news for President Cristina Fernandez, who is seeking re-election in October. For election coverage, see [ID:nARVOTE ].

Increased state spending ahead of the election and robust demand for Argentine cars, especially from Brazil, are also boosting activity.

High growth numbers are also welcome news for holders of growth-linked debt instruments known as GDP warrants ARTVPE3=RRBB ARTVPY3=RRBB. Demand for them is strong.

The government must make an annual payout on the warrants when economic growth tops a certain threshold.

Growth is expected to remain strong this year, although analysts say investment is being deterred by surging consumer prices.

"The economic activity could come in at 8 or 9 percent, perhaps close to 9 percent this year," Bridger said, adding that the presidential elections and the euro zone debt crisis could put the brakes on the expansion in the second half of the year. ($1 = 4.29 Argentine pesos)