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[WASHINGTON] Borrowing by small US firms hit its highest level in nearly a year, data showed on Thursday, suggesting businesses are ramping up investments to meet customer demand.
The Thomson Reuters/PayNet Small Business Lending Index for May rose to 137, its highest since June 2016, from an upwardly revised April reading of 125.4.
The increase was driven by an 11 per cent year-on-year rise in borrowing by businesses in arts and entertainment. Transportation and healthcare companies slashed borrowing, however, by 14 per cent and 13 per cent respectively.
The rise in the index "is not enough to say 'we're off to the races,'" said Bill Phelan, PayNet's chief executive and founder.
But at least "we're not going into contraction mode," he added.
Movements in the index typically correspond with changes in gross domestic product growth a quarter or two ahead. The US economy grew at a 1.4 per cent annual pace in the first quarter, and the Atlanta Fed projects second-quarter expansion at three per cent.
A separate barometer of small companies' financial health suggested companies are finding it easier to pay off old loans. The share of loans more than 30 days past due was 1.69 per cent in May, down from a month earlier, PayNet data showed.
Small business borrowing is a key barometer of growth because those 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 US lenders.