U.S. consumer spending surged in October to its biggest gain in seven months, previewing what could be a robust holiday shopping season amid moderate inflationary pressures.

The Commerce Department reported Thursday that spending jumped 0.6% last month, topping economists’ expectations of a 0.4% increase. It was the biggest gain since March.

Americans spent more on a variety of goods and services, but the biggest increases were on necessities such as prescription drugs, electricity and natural gas. Consumer spending accounts for more than two-thirds of U.S. economic activity and economic growth estimates for the fourth quarter are currently around a 2.5% annualized rate.

“Rising incomes and steady employment are likely to encourage most Americans to spend freely in the waning months of 2018, capping off a big year for consumers,” MarketWatch said. “Post-Thanksgiving sales suggest the holiday season will be a good one.”

Reuters noted “there are indications that economic growth is slowing,” citing a moderation in business spending on equipment, a deterioration in the trade deficit and further weakness in the housing market.

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But incomes rose 0.5% in October, a significant pickup from a 0.2% September gain, and the core personal consumption expenditures index — the Federal Reserve’s preferred inflation measure — edged up 0.1% after increasing 0.2% in September.

On an annualized basis, core PCE rose 1.8% last month, the lowest reading since February. It hit the Fed’s 2% inflation target in March for the first time since April 2012.

Inflationary pressures have “eased off, giving households a bit more cushion,” MarketWatch said, adding that “Sinking oil prices are likely to sharply reduce how much Americans spend to fill up their cars in the next few months.”

The Fed is still signalling it will raise interest rates again next month but Chairman Jerome Powell said Wednesday its policy rate was now “just below” a level that neither brakes nor boosts a healthy economy, sparking a big rally in stock prices on Wall Street.

“The strong jobs market and fast growth have strained the economy and generated more inflation, but not enough so far to pose a problem,” MarketWatch said.

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