PayNet reports the PayNet Canadian Small Business Lending Index (CSBLI) decreased 3% from 121.7 in March 2016 to 117.5 in April 2016. Compared to April 2015, the Index is down 12% and is at the lowest point in the Index since February 2013.
“This report shows a broader pullback,” states William Phelan, president PayNet. “Decreased borrowing and higher loans past due are showing up in most major industry sectors.”
Few industry sectors are expanding. The Accommodation & Food sector shows borrowing and investment falling to 0% from 5% the prior month. The Agriculture sector rate of contraction increased to -8% from -5%. Construction went negative at -1% for the first time since August 2015. Retail shows further deterioration to -10% and Transportation is down -16%.
Manufacturing continues to be the only sector showing an increase with investment up 8% from 6% the prior month. Professional Services also remains a bright spot but it too is slowing from over 20% to 16%.
On a regional basis, this release shows more erosion in Alberta which is down -22%. Ontario business investment fell from 9% (March) to 6% (April). Quebec also slowed from 13% (March) to 10% (April).
Loan quality is deteriorating, but not yet at the level of impacting lenders’ loss provisions. The PayNet Canadian Small Business Delinquency Index (CSBDI) 31-180 days past due increased 8 bps from 1.09% in March 2016 to 1.17% in April 2016. Compared to one year ago, delinquency increased 16 bps.
The rise in loans past due increased among all industry sectors but Agriculture. The biggest jump occurred in Accommodation & Food sector +79 basis points (bps), while Construction increased +9 bps and Manufacturing jumped +14 bps over the previous month. Increases in loans past due are up double digits in the following major industry sectors: Professional Services +18 bps, Retail +34 bps, Transportation +17 bps, and Wholesale Trade +11 bps.
Financial stress continues building in Alberta with a +13 bps increase in loans past due over the prior month and up +53 bps over the prior year. The only provinces where 30+ Days Past Due did not jump are British Columbia and Saskatchewan.
“Broad based contraction in business borrowing and higher loan past dues across industries and provinces means slower GDP and lower credit quality for the future,” Phelan added. “For right now, the resilience of Canadian business and borrowers is shown by their ability to navigate through a worsening economy.”