Canadian small business lending rises in July as economy grows

OTTAWA (Reuters) - Lending to Canadian small businesses climbed to the highest level in a year-and-a-half in July, data showed on Wednesday, pointing to a pickup in corporate spending that could help underpin recent economic strength.

The PayNet Small Business Lending Index rose to 126.2 in July, its highest level since January 2016 and up from 121.2 in June. On an annual basis, the index was up 6 percent.

The index of lending to medium-sized businesses fared even better, jumping to 238.9 from 223.2 in June and up 14 percent from a year ago.

The increase in lending was broad-based across sectors and regions, PayNet President Bill Phelan said.

“We’re starting to gain some steam and some momentum,” he said.

Lending to the transportation industry was up 17 percent compared to a year ago, while the construction and retail sectors were each up 9 percent.

An unexpectedly robust pace of growth in Canada in the first half of 2017 has prompted the Bank of Canada to raise interest rates twice this year so far. The central bank has been looking for an increase in business investment to help drive growth.

The increase in rates should not dampen corporate investment, as borrowing costs are still relatively low, Phelan said.

Indeed, the financial health of companies remained strong, with 30-day delinquencies declining to 0.97 percent in July from 1.09 percent in June, while the number of those that were 90 days or more behind on payments fell to 0.31 percent from 0.32 percent.

Reporting by Leah Schnurr; Editing by Paul Simao