NEW YORK (Reuters) - A key measure of U.S. business activity rose sharply in February from a year ago, as companies borrowed more to invest in their operations, but the reading was down slightly from the prior month and credit quality eased, a lender group told Reuters on Tuesday.
The Equipment Leasing and Finance Association (ELFA) said U.S. businesses originated $4.1 billion in loans, leases and lines of credit in February to invest in everything from computer hardware to office furniture and machinery.
That was slightly below January’s $4.2 billion total and well below December’s $9 billion figure, but up 28 percent from a year ago, when the U.S. economy was beginning its gradual recovery.
February marked the 10th consecutive month of year-over-year gains, and the third straight month such gains were above 20 percent.
“It’s a nice, steady trendline up,” said ELFA President and CEO William Sutton. “Everything we are seeing throughout the economy( points to) steady, albeit slow, growth.”
But the report also included early evidence credit quality may be slipping as lenders compete for business.
The group, which represents the lenders who finance half the capital investment in the United States each year, said 3.1 percent of borrowers were delinquent 30 days or more, up from 2.8 percent in January, marking the second-straight sequential increase.
Lenders considered 1.0 percent of loans in their portfolio as unlikely to ever be repaid, up from 0.9 percent in January.
Credit is widely available and “a lot of dollars are chasing too few deals,” Sutton said, adding that one month’s data was not enough to draw a clear trend.
Both delinquencies and charge-offs are down sharply from a year ago, ELFA noted.
Lenders approved 76 percent of capital spending credit applications they received in February, the highest level in at least two years, as credit standards eased, the survey found. In January, 74 percent of such applications were approved.
ELFA, which reports economic activity for the $521 billion equipment finance sector, provides its monthly report to Reuters a day ahead of its official release. Its monthly index measures some of the same trends as the government’s durable goods report and the Institute of Supply Management index, but precedes them by a few days.
Members include Bank of America Corp (BAC.N), Canon Inc (7751.T) affiliate Canon Financial Services, Caterpillar Inc’s (CAT.N) Caterpillar Financial Services Corp, CIT Group Inc (CIT.N), Dell Inc’s DELL.O Dell Financial Services, Deere & Co’s (DE.N) John Deere Credit Corp, Siemens AG’s (SIEGn.DE) Siemens Financial Services and Verizon Communications Inc’s (VZ.N) Verizon Capital Corp affiliate, among others.
Editing by Andre Grenon, Dave Zimmerman