US small-business borrowing hit record in April: PayNet  

JUN 2, 20155:12 PM

[NEW YORK] US small businesses across a broad swath of industries boosted borrowing to record levels in April, according to data released on Tuesday, pointing to a rebound in overall US economic growth from what was a dismal first quarter.

The Thomson Reuters/PayNet Small Business Lending Index rose to 141.5 from an upwardly revised March reading of 130.5.

From a year earlier, the index was up 13 per cent. At the same time, the delinquency rate on loans more than 30 days past due fell in April, to 1.52 per cent, suggesting the increased borrowing has not come at the expense of financial health.

"It's really firming up," PayNet founder Bill Phelan said of the trend in borrowing by companies in retail, accommodations, transportation, construction, health care, professional services and other industries.

"It will bode well for GDP for the rest of the year." The index has historically tracked ahead of US gross domestic product growth by two to five months.

US GDP fell at a 0.7 per cent annual rate last quarter. Data since then has been mixed.

US consumer spending unexpectedly stalled in April, data released on Monday showed. But manufacturing activity picked up in May for the first time in seven months and construction spending surged in April to a near 6-1/2-year high.

Even more critical than the actual data, perhaps, is how Fed officials interpret it as they prepare for a policy-setting meeting in about two weeks. There, views are nearly as mixed as the underlying data.

Boston Fed President Eric Rosengren, for instance, signalled on Monday he has begun to worry about the absence of a snapback in economic growth.

San Francisco Fed President John Williams, by contrast, has stuck to his view that the slowdown is likely temporary and indeed the first-quarter economy likely will turn out not to have been as weak as currently estimated.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading US lenders.

REUTERS

      

Saudi to post massive budget deficit: IMF   

JUN 2, 20155:15 PM

[RIYADH] Opec kingpin Saudi Arabia is forecast to post a budget deficit of 20 per cent of gross domestic product because of the sharp decline in oil revenues, the IMF said on Tuesday.

"Government spending in 2015 is expected to remain strong, partly due to a number of one-off factors, while oil revenues have declined," an International Monetary Fund team said after visiting the Gulf kingdom.

"As a result, IMF staff projects that the government will run a fiscal deficit of around 20 per cent of GDP in 2015." The report made no reference to the costly air campaigns Saudi warplanes are involved in, against the Islamic State group in Syria and Huthi rebels in Yemen.

The projected deficit translates into around US$130 billion as the IMF is projecting Saudi nominal GDP this year at US$649 billion.

Riyadh is projecting a budget shortfall of just US$39 billion.

The IMF said the decline in oil prices has resulted in a substantial decrease in revenues, but its impact on the rest of the economy has so far been limited by strong public spending.

The IMF team projects Saudi growth this year at 3.5 per cent, unchanged from 2014, but said the pace will slow to 2.7 per cent in 2016.

Oil prices crashed from around US$115 a barrel in June last year to just US$46 in January before recovering to around US$65.

Oil income makes up more than 90 per cent of Saudi public revenues. The world's largest exporter is currently pumping 10.3 million barrels of crude per day.

A sizable fiscal policy consolidation will be needed over the next few years to cut the deficit gradually.

"Going forward, the decline in government deposits will slow as the government starts to issue debt to finance the deficit," IMF said.

It also said the decline in oil revenues has emphasised the need for economic diversification, boosting spending efficiency and raising non-oil revenues.

Saudi firm Jadwa Research said the kingdom's foreign reserves dropped by US$49 billion in the first four months of 2015 following the dive in world oil prices.

The reserves, piled up over the past decade during high prices of crude, dropped from US$732 billion at the end of 2014 to US$683 billion at the end of April, Jadwa said in a report.

In March and April alone, the reserves dipped US$31 billion, it said.

In its regional economic outlook last month, the IMF estimated the oil price necessary to balance the Saudi budget at more than US$100 a barrel.

AFP