Borrowing by small businesses slid in January, a report on Tuesday showed, suggesting a cautiousness that bodes poorly for economic growth and job creation this year.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small companies, fell to 113.1 from an upwardly revised 115.8 in December, PayNet said.
To coax the economy into higher gear, the Federal Reserve last September moved to push down long-term borrowing costs with a third round of asset purchases that it says it will continue until the outlook for the labor market improves substantially.
That stimulus, on top of rock-bottom short-term interest rates since December 2008, has failed so far to light a fire under smaller U.S. firms, the index shows.
"It's a play-it-safe kind of economy for small businesses," PayNet founder Bill Phelan said in an interview. "They are not getting pulled in by the cheap credit and extra money floating around. They are continuing to hold back in investment growth."
PayNet's lending index typically correlates to overall economic growth one or two quarters in the future. It also is highly correlated with future job growth, Phelan said, with moves in the index heralding the outlook for jobs 9 to 12 months in the future.
Borrowing was up 13 percent from a year earlier, the index showed, but still well below its pre-recession peak. PayNet had initially reported the December figure as 112.
Small businesses often drive new job creation after recessions.
But this recovery, with its stop-and-start nature, has been different. The U.S. economy is expected to grow about 2 percent this year, an improvement from the nearly flat economy of the last three months of the year, but still too slow to generate much decline in the unemployment rate, currently high at 7.9 percent.
Government belt-tightening, including the automatic $85 billion in spending cuts that went into effect last Friday, could slow growth further, economists have warned.
Separate PayNet data showed financial stress at near-record-low levels. Accounts overdue by 30 days fell to 1.18 percent of the total from 1.19 percent the previous month. While big companies failed last year at a rate of about 3 percent, failures among small companies were just half that, Phelan said.
Longer-term delinquency rates also eased. Accounts behind 180 days or more, which are considered in default and unlikely to be paid, dipped to 0.22 percent from 0.24 percent.
Accounts behind 90 days or more, or in severe delinquency, fell to 0.26 percent from 0.27 percent.
PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders.
(Editing by Chizu Nomiyama)