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Election uncertainty weighs on parts of US economy: Fed beige book

Pre-election uncertainty is weighing on some US business sectors, the Federal Reserve's beige book survey said on Wednesday.

[WASHINGTON] Pre-election uncertainty is weighing on some US business sectors, the Federal Reserve's beige book survey said Wednesday.

However, the survey took on a hopeful tone, noting that nearly all regions in the world's largest economy continued to expand at a modest or moderate pace. The beige book collects the views of economists, business contacts and others in the 12 Federal Reserve districts.

Labour market conditions remained "tight" with "modest" employment and wage gains, according to the survey, which is prepared in advance of a Nov 1-2 monetary policy meeting. The strength of the US dollar also held back exports of manufactured goods, it said.

The report noted improving conditions in the St Louis, Kansas City and Dallas districts compared to the last survey, while only the New York region reported economic activity was unchanged.

"Outlooks were mostly optimistic, although contacts in a few districts expressed concern about economic uncertainty surrounding the upcoming presidential elections," according to the report.

Reporting collected in the Boston region found election uncertainty is "delaying some business decisions," and caused some "subdued" demand for loans and leasing, while Dallas said there are concerns it "will impact consumer spending," according to the report.

The Federal Reserve policymakers are next due to meet a week before US presidential and congressional elections on Nov 8. Most forecast models give Democratic presidential nominee Hillary Clinton a strong advantage over Republican Donald Trump.

However, polls show high levels of voter discontent and in public remarks Mr Trump is insisting the election is rigged, raising the possibility of messy aftermath.

In other comments, the Fed's report said, "manufacturing activity was mixed, and the strong dollar continued to dampen exports of manufactured goods, according to a few district reports."

The survey follows release of the closely watched Labor Department employment report earlier this month, which showed steady but slowing job creation, with 156,000 jobs added in September.

Unemployment rate moved up a tenth of a point to 5 per cent as more people joined the ranks of those seeking work - a possible sign of optimism in labour markets.

After raising the key federal funds rate for the first time in nearly a decade in December, the US Federal Reserve has refrained from doing so throughout 2016 to avoid interrupting a fragile recovery, despite indications early in the year that there might be three or four rate hikes.

As it is, analysts now expect one rate increase at most. In advance of the November vote, the Fed is not expected to change rates, and observers say an increase is more likely at the Federal Open Market Committee's final meeting of the year in December.

William Dudley, the influential president of the New York Federal Reserve Bank, told The Wall Street Journal last week that there was "not a lot of urgency" to act on US monetary policy.

The FOMC has been openly divided since the summer on the timing of the next rate: at the last policy meeting in late September, three FOMC members dissented from the vote, calling for a rate hike.

They have said the Fed needs to forestall inflation and avoid the need for sharper, faster interest rates increases, which could create unnecessary shocks to the economy.

They have been outnumbered, however, by policymakers who felt job markets remain slack and that signs of inflation are scarce.

Following the beige book's release, the futures market for the federal funds rate gave a nearly 70 per cent chance that rates would rise in December.