COSTA MESA, Calif.—A new report from Experian/Moody’s shows credit conditions for small businesses continue to improve.
The Experian/Moody’s Analytics Small Business Credit Index (SBCI) added 1.5 points to reach 116.7 from a revised 115.2 in the third quarter (previously 114.8). The index measures credit conditions for firms with fewer than 100 workers, and last quarter’s move set another all-time high—following a record-setting Q3.
This is the third consecutive quarterly gain for the index amid swiftly improving small-business credit conditions, according to Experian.
Credit balances and the number of trades each expanded in the fourth quarter, contributing to the rise in the SBCI. This was accompanied by a decline in the delinquency rate to a cyclical low of 8.5%. Additionally, job growth continued at a brisk clip last quarter, further supporting the top-line index value.
December payroll employment grew by 329,000, and upward revisions to October and November resulted in average monthly gains of 324,000 for the quarter. The economy generated 3.1 million jobs in 2014, the strongest pace since 1999. The stronger job market is reflected in various measures of consumer sentiment, Experian pointed out. “Both the Conference Board and University of Michigan consumer confidence indexes pulled higher to end the year, and both began 2015 at cyclical highs.”
Healthy fundamentals favor improved consumer sentiment in 2015 and are increasingly supportive of spending growth, Experian stated.
According to the Bureau of Economic Analysis’ advance estimate for Q4 gross domestic product, real consumer spending growth accelerated to its fastest pace since 2006.
“Plunging energy prices are a big support, freeing cash for other purposes,” the report explained. “Job growth is strong, and gains are coming broadly across industries and wage tiers. Wage and salary income growth is improving as labor markets tighten despite moderating in December. At least some of this additional expendable cash will make its way to small businesses, meaning additional short-term improvements are likely.”