TORONTO (Reuters) - Canadian commercial lending activity surged to its highest level more than in three years in the second quarter, a signal the country's smaller companies are supporting its tepid recovery through investment.
PayNet, which tracks commercial financing to thousands of North American small and medium-sized businesses, said on Wednesday its Canadian Business Lending Index rose 9 percent from the first quarter and 22 percent year over year.
"It's across the country," said Anthony Zambon, director of PayNet Canada. However, he noted that activity in Western Canada was especially robust due to strong international demand for the region's oil and other natural resources.
"These companies need to replace their machinery and equipment to keep operating. They had gotten to a stage where they've held off on this investment ... so there's a pent up need."
The commercial finance sector includes non-bank players such as machinery makers, whose loans and leases to customers are secured against the equipment sold.
The data marked the seventh consecutive quarter of growth since bottoming out in 2010, and the fourth straight double-digit advance on a year-over-year basis.
The Canadian PayNet index rose to 166, its highest reading since the first quarter of 2009. The number contrasted sharply with the corresponding U.S. index, which at around 100 was up only 2 percent quarter over quarter and 4 percent year over year.
"We're still maintaining growth which is twice as fast as U.S. growth," added Zambon.
The report echoed positive sentiment from earlier this month when data showed a surge in Canadian employment in August, compared with disappointing numbers in the United States.
Other PayNet data released on Wednesday showed moderate and severe loan delinquencies in Canada fell from the previous quarter.
Moderate loan delinquencies - defined as those being late by 30 days or more - were down to a previous record index low of 1.09 percent of total loans in June from 1.41 percent in March.
Severe loans in arrears - those behind more than 90 days - were down to 0.38 percent in June from 0.50 percent three months earlier.
Meanwhile, the business failure rate in Canada was at its lowest level since 2005, the year PayNet began collecting the data. Zambon cited dramatic drops in defaults in various sectors including manufacturing, retail and transportation since the height of the global recession in 2009.
"The important thing here is that the small business economy is strong and healthy and they're continuing to invest ... and also expand with regards to their businesses," said Zambon.
Editing by Jeffrey Hodgson