December 2, 2015 / 10:01 AM / 2 years ago

U.S. small businesses cut borrowing in October- PayNet

Dec 2 (Reuters) - U.S. small businesses cut borrowing in October, a sign that economic growth may weaken in coming months just as the Federal Reserve looks set to raise borrowing costs for the first time in nearly a decade.

The Thomson Reuters/PayNet Small Business Lending Index dropped in October to 131.7 from a downwardly revised reading of 137.9 reading in September. October’s decline of 0.2 percent from a year earlier was the first year-on-year drop since March 2013.

Small businesses “are pulling in their horns and they are hunkering down a little bit,” said Bill Phelan, President of PayNet. Uncertainty ahead of the Fed’s expected rate increase and next year’s U.S. presidential race may be keeping business owners from taking risks, he said.

The index, which hit a record in June, has historically tracked ahead of U.S. gross domestic product growth by two to five months.

The U.S. economy grew at a 2.1 percent annual pace last quarter, a pace that’s expected to cool to 1.4 percent this quarter, according to the latest modeling by the Atlanta Fed.

The Federal Reserve is expected to raise rates later this month from near zero, where it has kept short-term borrowing costs since December 2008. Central banks typically use rate hikes to slow growth and keep inflation in check.

The delinquency rate on loans more than 30 days past due held at 1.44 percent in October, separate data from PayNet showed.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading U.S. lenders. (Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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