September 2, 2015 / 9:12 AM / 2 years ago

U.S. small business borrowing down slightly in July: PayNet

(Reuters) - Borrowing by U.S. small businesses dipped slightly in July from a record level the previous month, an index released Wednesday showed, but its relative strength was seen as a sign of domestic momentum despite the recent volatility in global markets.

The Thomson Reuters/PayNet Small Business Lending Index edged down to 145.2 from an upwardly revised June reading of 146.4, but the readings marked the index’s two highest points since it was launched in 2005.

The July reading, up 13 percent from the same month a year ago, was driven by robust activity in key sectors like transportation and construction, said PayNet founder Bill Phelan.

“This is showing some strength - while foreign markets are falling, while corporations are pulling back on their investments,” Phelan said. “We’ve got this small business economy anchoring the U.S. economy.”

The small-business borrowing index has historically been a leading indicator of U.S. gross domestic product by two to five months, and is also a good predictor of capital spending and job growth, Phelan said.

GDP expanded at an upwardly revised 3.7 percent annual rate last quarter, buoyed by consumer spending.

The data comes as the Federal Reserve is weighing whether to increase U.S. interest rates from near zero, where they have been kept since December 2008.

A recent stock market selloff has given some Fed officials pause and prompted investors to cut their predictions of a September U.S. rate hike to about 32 percent.

But Phelan said the high levels of borrowing, spread evenly throughout the United States and across most industries, augur economic strength and financial health in the small business sector.

Small businesses have “a lot of capital to borrow, a lot of capital to invest more when the opportunity presents itself,” Phelan said. “That means there’s ... a lot of runway for GDP expansion.”

PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading U.S. lenders.

Reporting by Megan Cassella, editing by G Crosse

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