U.S. retail sales increased more than expected in March amid a surge in receipts at online retailers, further evidence that the economy ended the first quarter on solid ground.

Retail sales rose 0.7% last month, the Commerce Department's Census Bureau said on Monday. Data for February was revised higher to show sales rebounding 0.9% instead 0.6% as previously reported. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.3% in March.

The report followed news this month of strong employment gains in March, and reinforced expectations that the Federal Reserve could delay cutting interest rates this year.

Despite higher inflation and borrowing costs, spending continues to hold up, confounding predictions of distress among lower-income households, thanks to the resilient labor market.

Latest Bank of America Credit card data showed lower-income spending continues to outpace higher-income spending.

"An important reason is that, although lower-income consumers have been disproportionately affected by inflation, they have also been the biggest beneficiaries of the robust labor market," economists at Bank of America Securities wrote in a note. "Lower-income workers have seen the largest cumulative wage gains since the start of the pandemic."

Job gains averaged 276,000 per month in the first quarter, compared to 212,000 in the October-December quarter. Though wage growth is slowing, it remains above 4.0% on a year-on-year basis.

Retail sales excluding automobiles, gasoline, building materials and food services increased 1.1% in March. Data for February was revised higher to show these so-called retail sales gaining 0.3% instead of being unchanged as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product.

Though spending probably slowed from the fourth quarter's brisk pace, it likely remained sufficient to support the economy in the January-March quarter. Growth estimated for the first quarter are currently as high as a 2.4% annualized rate. The economy grew at a 3.4% pace in the October-December quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)