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OTTAWA (Reuters) - Lending to Canadian small and medium-sized companies accelerated in August as activity in the manufacturing sector picked up, a report showed on Tuesday, boding well for stronger business investment.
The PayNet Canadian Small Business Lending index rose to 123.2 in August from 118.8 the month before, while the index of medium-sized firms increased to 218.8 from 204.8.
Although both measures were still down compared to a year earlier, by 6 percent and 2 percent respectively, the annual declines were not as steep as had been seen in July.
Manufacturing firms led the gains, with lending to businesses surging 16 percent compared to a year before. Economists have been looking for the sector to help drive growth as the oil-exporting economy adjusts to lower oil prices.
"We've needed something all along to pick up the slack for energy and manufacturing is doing it," said PayNet President Bill Phelan.
The year-over-year decline in the retail and accommodation and food industries also moderated, suggesting consumers were showing strength.
Companies' financial health also looked strong, with the amount of small businesses 30 days or more behind on their loans falling to 1.12 percent from 1.17 percent. Firms that were 90 days or more in arrears held steady at 0.35 percent.
Reporting by Leah Schnurr; Editing by James Dalgleish