WASHINGTON -- The U.S. economy staged a bigger rebound last quarter than first thought, outpacing the rest of the developed world and bolstering confidence that it will remain sturdy in coming months.
The economy as measured by gross domestic product expanded at an annual rate of 3.7 percent in the April-June quarter, the Commerce Department reported Thursday. That's more than a percentage point greater than the initial 2.3 percent estimate and a sharp upgrade from the anemic 0.6 percent advance during the January-March quarter.
"The economy is looking solid," said Michael Feroli, chief economist at JPMorgan Chase & Co. in New York, who projected 3.4 percent GDP growth. "There's a pretty broad-based pickup in domestic demand."
Since the spring, the U.S. economy has dealt with a slowdown in China and recent turbulence in global financial markets. It remains unclear how the U.S. will fare in the months ahead if developments abroad deteriorate.
The robust second-quarter numbers, however, indicate a level of growth unmatched by the rest of the developed world and a solid footing heading into the second half of the year.
"The U.S. economy entered the current market turbulence with momentum, which will help it to shrug off the drag from China and other developing economies," said Diane Swonk, chief economist at Mesirow Financial.
In contrast, Japan -- the world's No. 3 economy -- shrank at an annual pace of 1.6 percent in the second quarter. The French economy was flat, Germany eked out 0.4 percent growth and the United Kingdom expanded at a modest 0.7 percent rate.
U.S. stocks jumped for a second day Thursday as a relief rally swept across global markets. The Standard & Poor's 500 Index posted the biggest two-day surge since 2009, rising 2.4 percent Thursday to close at 1,987.66.
The latest GDP estimate is the second of three for the quarter, with the third release scheduled for late September when more information becomes available.
The U.S. economy probably will cool slightly in the third quarter, but economists expect solid growth that should keep fueling jobs and spending.
Paul Ashworth, chief U.S. economist at Capital Economics, projects GDP growth of 2.5 percent in the current July-September quarter.
"The economy regained a massive amount of momentum in the second quarter and all the evidence from July's activity and employment data suggests that momentum continued into the third quarter," Ashworth said in a note to clients.
Mark Zandi, chief economist at Moody's Analytics, is forecasting the economy to grow around 2.8 percent in third quarter and accelerate to a 3.5 percent annual rate in the October-December period. But he said that is based on an expectation that the recent market turbulence will not inflict long-lasting damage on the economy.
"My forecast rests on the assumption that this is a garden variety market correction, with stock prices dropping by 10 percent from their recent high," Zandi said. "If we get a bigger decline of 20 percent, then that will hurt consumption and housing, and we will not get the job growth we are expecting."
The revision for second-quarter growth was broad-based, reflecting more robust spending by consumers, businesses and government.
Consumer spending grew at annual rate of 3.1 percent, up from a 1.8 percent growth rate in the first quarter.
Business investment in structures and equipment was revised higher to show growth of 3.2 percent instead of a decline. Housing construction jumped 7.8 percent, up from an initial estimate of 6.6 percent growth. Businesses spent more to restock their store shelves as well.
Also fueling growth were strong gains in state and local government spending, largely because of greater public construction outlays.
"The U.S. consumer is looking healthy," Jennifer Lee, a senior economist in Toronto for BMO Capital Markets, said before the report. "Employment is strong. The housing recovery is going to continue."
Before the recent financial market turmoil, many economists had assumed that signs of an improving U.S. economy would lead the Fed to begin raising its key short-term rate at its Sept. 16-17 meeting. Now many analysts say a September rate increase is probably off the table.
"With the economy gaining strength ... and labor markets marking further progress, the Fed should feel 'compelled' to raise interest rates this year," said Sal Guatieri, senior economist at BMO Capital Markets. "Whether it moves in September will largely hinge on whether global financial markets settle down in the weeks ahead."
Analysts cautioned that there could be more turbulence ahead, in part because of unsettled conditions in China. Beijing has devalued its currency and taken other steps to address a major slowdown in its economy, the world's second-largest and a major global growth engine.
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Shobhana Chandra, Michelle Jamrisko, Kristy Scheuble and Callie Bost of Bloomberg News.
Business on 08/28/2015