Daily News: February 4, 2014

PayNet: Small Businesses Economy Set to Support GDP Growth

The December PayNet small business trends show a strong finish to 2013 that will help sustain growth in the U.S. economy in Q1/14. The Thomson Reuters/PayNet Small Business Lending Index (SBLI) extended its string of year over year increases registering 121.6 in December, a 5% increase over last year and a 6% increase over November, which was restated to 114.6 from a preliminary value of 111.4.

PayNet added that when small businesses invest as shown in this report, they are expressing visible optimism for future profits. At the same time, loan delinquencies increased in this latest report signaling an end to the best part of the credit cycle. The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) increased slightly to 1.47%. Even so, credit quality remains very high; this latest uptick signals small businesses are willing to take more financial risks as shown in the increased SBLI.

“Small businesses are hitting a bunch of singles and doubles, rather than swinging for the fences. This steady growth is the type needed to avoid over expansion,” said William Phelan, president of PayNet.

This is an important indicitor as one-half of the U.S. economy is not measured very well, PayNet said. Small businesses make up a big part of this economy. When they are investing and finding it easier to pay their bills, GDP gets a lift. PayNet noted that the SBLI is a leading economic indicator of GDP by two to five months. This latest report means that Q1 GDP will be positive.