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U.S. Small Businesses Increase Borrowing in December

“U.S. small businesses boosted borrowing in December, pushing a broad lending index to its highest level in nearly seven years and signaling that economic growth may continue apace in the early part of this year.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, rose to 121.6 in December from an upwardly revised 114.6 in the prior month, PayNet said on Tuesday.

That was the highest level since March 2007, the data showed, and was up 5 percent from a year earlier. A rise in the index is historically correlated with stronger U.S. economic growth a quarter or two in the future.

“We are fairly optimistic there will be some growth coming at least from the small business portion of the economy,” PayNet founder Bill Phelan said. The rate of growth is “not too frothy, and not too tepid either,” he said.

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Small companies typically take out loans to buy new tools, factories and equipment, so more borrowing can be an early signal of increased hiring ahead.

It’s a good sign for theĀ Federal Reserve, which is dialing down its massive bond-buying program in a nod to stronger growth and a rapid decline in theunemployment rate, which registered 6.7 percent in December….”

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