Sept 1 (Reuters) - Borrowing by U.S. small businesses sank in July, and more firms were late on repaying existing loans, data released on Thursday showed, both trends pointing to softer economic growth ahead.
The Thomson Reuters/PayNet Small Business Lending Index fell to 121.5 in July, the lowest level since January and down from an upwardly revised 139.2 in June. Borrowing fell 16 percent from a year earlier, driven by declines in all major industry groups and the 10 biggest states.
Companies also struggled to pay back existing debts. Loans more than 30 days past due rose in July to 1.63 percent, the fourth straight monthly increase and the highest delinquency rate since December 2012, separate data from PayNet showed.
“The thing that scares us is the rise in delinquencies,” said Bill Phelan, PayNet’s president. “Every one of these months where investment is down and deliquencies are up is one step more toward contraction.”
The figures come as the Federal Reserve mulls the timing of its next rate hike. Higher interest rates tend to slow economic growth.
The PayNet index typically corresponds to U.S. gross domestic product growth one or two quarters ahead. The U.S. economy grew an estimated 1.2 percent in the second quarter, though many economists believe that rate improved in the third quarter.
Small business borrowing is a key barometer of growth because small companies tend to do much of the hiring that drives economic gains.
PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading U.S. lenders. (Reporting by Ann Saphir; Editing by David Gregorio)