WASHINGTON, April 29 (Reuters) - New orders for key U.S.-manufactured capital goods increased more than expected in March while shipments of those products surged, suggesting that business spending on equipment helped to drive economic growth in the first quarter.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, jumped 3.3% last month after an upwardly revised 1.6% increase in February, the Commerce Department's Census Bureau said on Wednesday.

Economists polled by Reuters had forecast these so-called core capital goods orders gaining 0.5% after a previously reported 0.7% advance in February. Shipments of core capital goods advanced 1.2% after rising 1.3% in February.

The Census Bureau has caught up on releasing durable goods data after delays caused by last year's government shutdown. 

Federal Reserve officials were due to resume a two-day policy meeting on Wednesday. They were expected to keep the U.S. central bank's benchmark overnight interest rate in the 3.50%-3.75% range.

Business spending on equipment is being powered by an artificial intelligence spending boom, which is fueling demand for information processing equipment. There are, however, concerns that the U.S.-Israel war with Iran, which has raised the prices of oil and other commodities, could make businesses more cautious about new capital investments.

Economists expected that business investment in equipment helped to offset an anticipated further slowdown in consumer spending in the first quarter. 

A Reuters survey of economists is forecasting that GDP increased at a 2.3% annualized rate last quarter. Economic growth nearly stalled in the fourth quarter, with GDP rising at only a 0.5% pace. The Commerce Department's Bureau of Economic Analysis will publish its advance estimate of first-quarter GDP on Thursday.