Consumer spending, which accounts for more than two-thirds of US economic activity, rose 1.1% in March, according to the Commerce Department.
February data was revised up to show disbursements grew 0.6%, instead of the 0.2% previously reported.
Spending was driven by demand for international travel, restaurant dining and hotel stays. Health spending and spending on leisure and transport services also increased. Spending on goods grew, but this mainly reflected gasoline and other energy products, as well as food, whose prices have risen sharply.
Economists polled by Reuters had expected consumer spending to rise 0.7 percent.
Cases for aggressive monetary policy by the US central bank were also bolstered by other data showing US workers’ compensation posted its biggest rise in at least 21 years in the first quarter. Companies are raising wages in a desperate attempt to attract workers.
Strong consumer spending heading into the second quarter allayed fears of a recession after the economy shrank 0.4% in the first three months of the year.
“There is nothing going to go wrong with the economy as the consumer continues to lead the way to prosperity,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “There is no recession on the horizon yet.”