The U.S. economy showed broad-based signs of acceleration heading into the end of the year, with consumers ramping up spending, businesses stepping up investment and jobless claims falling to historic lows.

Household spending rose 1.3% in October from a month earlier, while personal income increased 0.5% last month, the Commerce Department said Wednesday. Consumers are benefiting from a strong labor market. And they are spending at a faster pace than inflation, which recently hit a three-decade high.

Jobless claims, a proxy for layoffs, fell to 199,000 last week, the lowest weekly level in 52 years, the Labor Department separately said. The sharp decline in unemployment claims suggests rising wages and bountiful job openings could continue to buttress consumer spending—the economy’s main engine—despite fading government stimulus and dwindling savings.

“Consumer demand remains quite strong,” said Gregory Daco, chief U.S. economist at Oxford Economics. “People are looking to travel. They’re still looking to eat out. They’re still looking to make purchases for the end-of-the-year holidays.”

Elevated inflation, stoked by strong demand and limited goods and labor supply, poses a risk to the economy, though. Federal Reserve officials at their meeting earlier this month signaled greater doubts over how long it would take for inflation to abate and how soon they would need to raise interest rates to cool the economy, minutes from the meeting released on Wednesday showed.

Consumers increased spending on goods, including big-ticket and smaller purchases, by 2.2% in October. Spending on services, which were hit hard by the pandemic, is showing glimmers of improvement. Outlays on services grew 0.9% last month, an acceleration from the preceding two months.

Inflation IndexesChange from a year earlierSources: Labor Department (CPI) and Commerce​Department (PCE)*For all urban consumers ​†Seasonally adjusted
RECESSIONConsumer price index*Personal consumption expenditures price​index†2008’10’15’20-2.502.55.07.5%

Some sectors that are particularly vulnerable to the pandemic are starting to see a pickup and are in a much better position than a year earlier. For instance, international travel to major U.S. airports rose in November after the U.S. lifted its travel ban on Europeans, Jefferies economists said in a note. Spending among tourists could help boost U.S. retail sales, the economists said.

Companies such as manufacturers face higher material and shipping costs, as well as labor and parts shortages that could delay some shipments this holiday season. Still, early signs suggest that global supply-chain problems are abating. In Asia, Covid 19-related factory closures, energy shortages and port-capacity limits have eased in recent weeks.

New orders for nondefense capital goods excluding aircraft, a closely watched proxy for business investment, were up 0.6% in October compared with the previous month, Commerce Department data show. Business investment has grown solidly this year.

In an economy where there is a shortage of workers, companies are investing in machinery and technology that make their existing employees more productive, said Gus Faucher, chief economist at PNC Financial Services Group Inc. “I suspect that will remain strong through 2022,” he said.