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WASHINGTON (AP) — Consumers stepped up their spending at retail stores last month, providing a boost to the economy in the early phases of the winter holiday shopping season.

Retail sales rose 0.7% in November, the Commerce Department said Tuesday , a solid increase and higher than October's 0.5% gain. Sales jumped 2.6% at auto dealers, driving most of the gain. Some of that demand likely reflected a need for new cars in parts of the southeast slammed by Hurricane Helene in October, as well as healthy incentives provided by car dealers. Big discounts at many retail chains also attracted some consumers.

The boost in spending underscores that the economy is still growing at a healthy pace even with higher interest rates, a trend that could cause the Federal Reserve to lower borrowing costs more slowly next year than they have previously signaled. The Fed will announce its latest rate decision Wednesday.

At the same time, there were some signs of consumer caution, as sales at grocery stores, clothing shops, and restaurants fell. Outside of car dealers and online retailers, sales gains were modest.

“We ultimately expect this will be a decent holiday sales season for retailers,” Tim Quinlan, an economist at Wells Fargo, said in a note to clients. “It’s not going to knock anyone’s socks off in the wake of record pandemic gains, but continued consumer momentum means it’s unlikely to be overly weak either.”

The economy expanded at nearly a 3% annual pace in the July-September quarter and some economists forecast steady growth in the final three months of this year as well. There are some signs of sluggishness in the job market, as hiring has weakened since early this year, but layoffs are also relatively rare and the unemployment rate is at a low 4.2%. Paychecks are growing a solid 4% pace, on average nationwide, which is modestly faster than inflation and helps fuel more spending.

Sales rose modestly at stores selling furniture, electronics, and home and garden supplies. Since the retail sales report isn't adjusted for inflation, some of the increase reflects higher prices. Sporting goods stores reported a 0.9% gain. Sales at online retailers jumped 1.8%.

Spending at restaurants and bars, meanwhile, dropped 0.4%, a sign that consumers did pull back in one discretionary category. Grocery store sales also dipped 0.2%.

On Wednesday, the Fed is expected to cut its key rate for a third time this year, after a big half-point cut in September and a quarter-point last month. But Fed officials, led by Chair Jerome Powell, are also expected to signal that they may reduce their rate only two or three times next year, leaving it far above its pre-pandemic level, when rates on mortgages, auto loans, and credit cards were much slower.