OTTAWA, July 18 (Reuters) - Lending to Canadian small businesses picked up in May on stronger activity in the agriculture and consumer sectors, data showed on Tuesday, suggesting companies were becoming more willing to invest two years after a slump in oil prices hit the economy.
The PayNet Small Business Lending Index rose to 124.2 in May from 121.9 the month before. Compared to a year ago the index was up 5 percent, its second straight month of annual gains.
Lending to medium-sized businesses also picked up, rising to 235.1 from 234.5 in April.
Increased lending was seen in most provinces, including Alberta and Saskatchewan, which are sensitive to the energy sector.
The drop in oil prices put Canada in a brief recession in 2015 but economic growth has rebounded, prompting the central bank to raise interest rates for the first time in nearly seven years last week.
"Canadian business is back," said PayNet President Bill Phelan.
"It certainly is very positive for future growth because you have all these sectors contributing, it's not just an energy-driven economy."
The gauge of lending to agriculture companies rose to 208.3 from 200.7 while the accommodation and food sector increased to 217.4 from 214.5.
Lending to construction companies rose to 140.6 from 137.9 as groundbreaking on new homes has been strong this year, despite signs of cooling in some parts of Canada's housing market.
The financial health of Canadian companies continued to look strong, with the share of small companies that were behind 30 days or more on their loans holding steady at 1.09 percent. Those that were 90 days or more in arrears dipped to 0.32 percent from 0.35 percent. (Reporting by Leah Schnurr; Editing by Meredith Mazzilli)