Crisis, what crisis? U.S. economy steams along | McClatchy Washington Bureau

A funny thing happened while the world financial markets shuddered in panic this week. A range of indicators about the U.S. economy, the world’s largest, showed a recovery that’s continuing to gain steam.

Even as stocks whipsawed, data on housing, consumer confidence, the labor market and economic growth all showed the economy flexing its growing muscle.

The latest data came Thursday when the Bureau of Economic Analysis said the U.S. economy grew by a blazing 3.7 percent from April through June, not the 2.3 percent reported last month. Businesses built their inventories at an unusually high pace and helped power along the U.S. economy, the bureau said.

Also, the Labor Department reported Thursday that first-time claims for unemployment benefits fell 6,000, to 271,000, for the week that ended on Aug. 22. That exceeded the forecasts of mainstream economists and suggests that August hiring, to be reported by the government on Sept. 4, is likely to remain at its healthy pace.

Those two developments follow data points earlier in the week that showed consumer confidence snapped back in August to its highest reading in seven months. And sales of new homes rose by 5.4 percent in July, the Commerce Department reported, good news on top of last week’s reading of resale of existing homes, which hit its highest point in more than eight years.

With that positive view of the U.S. economy, some economists wonder why financial markets look past U.S. strengths and get worked up over an economic slowdown in China and some problems in its insular stock market that is off limits to most foreign investors.

“The economic picture in the United States, Europe and Japan doesn’t look all that bad,” said Scott Anderson, chief economist for Bank of the West in San Francisco. “The global economy might be able to weather this if China could get its act together and stop acting like they’re panicking over there.”

China intervened again its in financial markets Thursday, quietly buying up stocks and helping to push its stock indexes into positive territory after a week of turmoil. That followed a steep run-up of U.S. stocks Wednesday that continued into early trading Thursday, when the Dow Jones industrial average opened up sharply.

Economists do question if the strong second-quarter growth rate of 3.7 percent can be continued, after a slow first quarter of anemic 0.6 percent growth. Working against the hot growth is a strong build in inventories from April to June that is likely to be worked off from July through September. Rather than order more goods, companies may be working off what they’ve ordered.

“With inventories continuing to build unsustainably, the correction will undoubtedly impact growth in the third quarter, and perhaps the fourth,” warned Nariman Behravesh, chief economist for forecasters IHS Global Insight.

Still, Thursday’s jobless claims numbers were important because they suggest the financial turmoil wasn’t having an immediate effect on the job market. If China’s stumbles continue, however, it could spell trouble for California’s economy, one of the world’s largest all by itself.

“The California economy is doing great,” said Anderson, pointing to strong July employment data and “no real sign that I can tell that California is getting impacted.”

But California seaports, along with those up the coast in Washington, are the passage point for most goods coming from and going to China. Chinese tourists flock to the U.S. Pacific Coast, and distrusting their own economy, Chinese citizens have been aggressive real estate investors in many U.S. cities. Protracted financial woes in China could dent not just U.S. trade but tourism and direct foreign investment on the U.S. West Coast.

And if China continues to roil global finance, it could dry up funds for venture capitalists in California’s Silicon Valley that fund tech and innovation start-ups.

“That could certainly impact areas like the Valley that have been red hot in recent years,” said Anderson, who closely follows the California economy.

Another growth question is whether the Federal Reserve begins hiking its benchmark interest rate, bumping up borrowing costs across the economy. The Fed hasn’t raised its rate in almost a decade, and it was expected to so in mid-September before China’s woes spilled into global financial markets.

The president of the influential Federal Reserve Bank of New York, Bill Dudley, on Wednesday described as “less compelling” the argument for a rate hike next month.

But he cautioned that it “could become more compelling” in September if financial markets calm and incoming data remains strong.

Politics poses a threat, too. The fiscal year ends Sept. 30 with the possibility of a partial government shutdown. Congress still must renew highway funding and raise the debt ceiling. The Obama administration’s projected to run out of extraordinary measures to fund government around mid-November.

“At this time in the global economy, it is essential that we continue to do everything we can to maintain America’s domestic economic momentum – including avoiding a return to fiscal brinksmanship,” Jason Furman, head of the White House Council of Economic Advisers, said in a statement on the growth numbers.