The March 2016 data release of the Thomson Reuters/PayNet Small Business Lending Index (SBLI), which is a leading economic indicator of GDP, decreased from 138.9 in February 2016 to 135.3 in March 2016. Compared to the same month one year ago, the index is up 4%.
The small decrease in the SBLI comes one month after a 17% jump in February, the largest monthly increase in the Index's history.
“March data confirms the economic stall. Private companies aren’t willing to take on risks right now,” states William Phelan, president of PayNet, Inc. “In this risk-off posture, GDP will remain moderate and below its long-term potential.”
In the aggregate, private companies are maintaining production capacity by investing in replacement levels. However, most industry sectors are reducing investment reflecting their bearish outlook for the economy. Construction remains the only major sector driving this economy at 9.2%.
Finances for private companies mirror the modest investment activity. The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31-90 days past due held steady at 1.21% from February 2016 to March 2016. As compared to one year ago, delinquency decreased 3 bps; this is the 10th consecutive month of year-over-year decreases after 12 straight months of increases.
Transportation delinquency is up 5 bps to 1.28%, its 13th consecutive monthly increase and its highest level since April 2013. Agriculture delinquency is up 3 bps to 0.63%, its sixth consecutive monthly increase and its highest level since August 2011. Health Care and General delinquencies each decreased 1 bp.
Credit quality, which we had predicted to worsen somewhat in 2016, may remain unusually high due to this risk-off mentality, so business defaults will likely remain lower than previously forecasted.
PayNet Inc. is the leading provider of credit ratings on small businesses enabling lenders to achieve optimal risk management, growth and operational efficiencies. PayNet maintains the largest proprietary database of small business loans, leases and lines of credit encompassing over 23 Million contracts worth over $1.3 Trillion. Using state-of-the-art analytics, PayNet converts raw data into real-time marketing intelligence and predictive information that subscribing lenders use to make informed small business financial decisions and improve their business strategy. For more information, visit paynetonline.com and sbinsights.net.