Small business borrowing falling

The small business sector is turning bearish on borrowing, according to the latest data from the Thomson Reuters/PayNet Small Business Lending Index (SBLI), which has posted a decrease for the third consecutive month.

The latest data release shows May’s index fell to 128.6 from 129.5 in April 2016, – a 1% decline. Compared to the same month one year ago, the index is down 3%, the second consecutive year-over-year decrease.

“Small businesses remain bearish for now. The industrial sector in particular is on-hold while the consumer sector is providing the main source of growth,” notes William Phelan, president of PayNet.

Of the market sectors under analysis, construction expanded the most by 9.2%, followed by arts, entertainment and recreation by 8.2% and retail trade by 6%.

In contrast, mining and agriculture contracted the most, dropping by 14% and 15%, respectively. Food and accommodation registered a sharp pullback, falling by 6%, compared with the 3% fall recorded in April.

The data also suggest the financial health of small businesses shows increased delinquency. The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31-90 days past due increased 3 bps from 1.23% in April 2016 to 1.26% in May 2016, its highest level since September 2014.

Compared to one year ago, delinquency increased by 2 bps, the first time delinquency has increased year-over-year since May 2015.

“This latest data release confirms that the US economy will continue to tread water over the next quarter, albeit with credit quality of small business remaining above average for the remainder of 2016,” Phelan noted.