The rise in spending despite flat incomes in February suggests households were becoming positioned to pick up the baton from the government and a spate of inventory-rebuilding as the prime drivers of growth.
"Consumers are getting more comfortable, which is an essential ingredient for a sustainable recovery. The Federal Reserve should be pleased to see steady spending growth, but will not raise rates until the job picture improves," said Chris Low, chief economist at FTN Financial in New York.
Spending increased 0.3 percent last month after rising 0.4 percent in January, a Commerce Department report showed on Monday. The increase was in line with market expectations. Spending normally accounts for about 70 percent of US economic activity.
The data had little impact on US financial markets. US stocks opened higher as Greece launched a sovereign bond issue, easing concerns about the country's debt problems. US Treasury debt prices fell, the dollar dipped against the euro.
Lackluster spending has raised worries the economic recovery from the worst downturn since the 1930s that started in the second half of 2009 could loose steam when government stimulus and the lift from inventories wanes.
Analysts said the steady rise in spending over the last five months supported views the labor market was turning, with payrolls expected to grow in March.
"It may be the sort of leading indicator of job gains in the sense that things are happening out there that consumers have confidence to spend even though the top line employment numbers haven't been that supportive," said Kurt Karl head of economic research at Swiss Re in New York.
JOB GROWTH EYED A Reuters survey forecast the closely watched employment report due on Friday to show employers added 190,000 jobs after cutting 36,000 positions in February, largely driven by hiring for the 2010 census. This would mark only the second time payrolls have increased since the recession started in December 2007.
Spending adjusted for inflation rose 0.3 percent last month, the Commerce Department said, adding to a 0.2 percent increase in January.
"The increase in both nominal and real spending suggests that real consumption is on course to grow at an annualized rate of around three percent in the first quarter," said Paul Dales, a US economist at Capital Economics in Toronto.
"That would be enough to add one percentage point to first-quarter GDP growth relative to the fourth." Consumer spending rose at a modest 1.6 percent rate in the fourth quarter, slowing from 2.8 percent in the prior period, according to a government report on Friday.
However, analysts still worry employment growth may not be robust enough and wages will continue to increase modestly, limiting the rise in spending.
Personal income was flat last month following January's 0.3 percent rise, the Commerce Department said. Payrolls of goods-producing industries fell $3.5 billion in February after increasing $5.2 billion, while manufacturing slipped $1.4 billion following a $5.0 billion gain.
This probably reflected the winter storms that struck parts of the country and kept some hourly paid workers at home.
Real disposable income was flat last month after falling 0.4 percent in January. With no income growth, savings fell to an annual rate of $340 billion, the lowest level since October 2008. The saving rate slipped to 3.1 percent, also the smallest rate since October 2008, from 3.4 percent the prior month.
The data also showed the personal consumption expenditures price index, excluding food and energy, rising 1.3 percent in the 12 months to February. The index, which is a key inflation gauge monitored by the US Federal Reserve, increased 1.5 percent in January.
