PayNet Canadian Q1 Trends: 2014 Slowing Investment, Risk Return
Commercial borrowing by small and medium-sized businesses in Canada moderated in Q1/14 but was still above the Q1/13. The Canadian Business Lending Index which measures the volume of new commercial loans and leases to small businesses declined 1% to 220 from Q4/13.
Decreased investment occurred after the previous 8 quarters exhibited an average 22% year-over-year growth rate.
CBLI increased 13% from the same quarter one year ago, which is the smallest year over year increase since Q3/11.
“Canadian businesses are still positioned for continued growth, however the pace of investment will be tempered by financial risk rising,” says Anthony Zambon, director, PayNet Canada. ”The slight decrease in investment in the first quarter may simply be a dent in the growth curve as lenders step back to assess their delinquency and businesses reassess their own needs in the current economy.”
The CFLA Business Credit Delinquency moderate loan delinquencies increased significantly to 2.03% (vs. 1.47% in the U.S.). This is up 55 points from the last report and is in line with an increase in risk taking.
“Increasing loan delinquencies is a concern as both moderate and severe delinquencies exceed U.S. levels for the first time Zambon added. This latest report indicates the business cycle is in a maturing growth stage, with investment moderated slightly as delinquencies have increased.”
The CFLA Business Credit Delinquency Trends reflect the percentage of Canadian businesses that are more than 30 days past due or 90 days past due with Canadian finance companies. The BCD Trends measure small business financial stress and provide an early warning of future insolvency.
The Canadian Business Lending Index measures the volume of new commercial loans and leases to small businesses indexed so that January 2005 equals 100. Because small businesses generally respond to changes in economic conditions more rapidly than larger businesses do, the CBLI serves as a leading indicator of the economy.