PayNet reports that the PayNet Canadian Small Business Lending Index (CSBLI) increased 3% from 126.5 in May 2018 to 130.5 in June, marking the sixth consecutive month of growth. Compared to the same month one year ago, the index is up 8%.

“In a decisive turnaround, Canadian small businesses investment levels have shifted to solid expansion mode in recent months after spending much of 2017 hunkered down,” said PayNet President William Phelan. “Loan originations among Canadian small businesses accelerated for the second consecutive month on a year-over-year basis which, if sustained, should provide a lift to economic growth and GDP — though credit risk may increase as well.”

Compared with June last year, Manufacturing saw lending jump 18% in June 2018, its sharpest increase since July 2011 and its fourth straight month of double-digit gains on an annual basis. Other industries experiencing substantial year-over-year increases include Transportation (+24% Y/Y), Accommodation and Food (+23% Y/Y), and Retail (+12% Y/Y). Three industries contracted modestly on a year-over-year basis: Professional Services (-6% Y/Y), Wholesale (-4% Y/Y), and Agriculture (-4% Y/Y). Regionally, Atlantic Canada (+15% Y/Y) and Alberta (+11% Y/Y) were the biggest positive movers, while Saskatchewan (-6.2%) declined.

With increased investment, credit risk is expected to rise in the months ahead, and recent data reflect this likelihood. According to the PayNet Canadian Small Business Delinquency Index (CSBDI), loans 30 days past due or more increased 2 bps from 0.93% in May 2018 to 0.95% in June 2018. Compared to June 2017, however, delinquencies are down 14 bps and have fallen for 15 consecutive months on a year-over-year basis. Year-over-year, Manufacturing (+25bps Y/Y) and (Wholesale (+12bp Y/Y) saw delinquencies rise. All other industries saw delinquencies fall. Regionally, delinquencies fell or held steady across all provinces except Manitoba (+8bp Y/Y) on a year-over-year basis. Quebec (-43bp Y/Y), British Columbia (-30bp Y/Y), Alberta (-22bp Y/Y), and Saskatchewan (-21bp Y/Y) all saw delinquencies fall by double digits compared to June 2017.

“This month’s release is indicative of a positive outlook for Canadian small businesses and the broader Canadian economy,” added Phelan. “Small companies are a bellwether for economic growth, and PayNet data shows Canadian small businesses across industries and provinces on the move towards more production.”