PayNet’s Canadian Small Business Lending Index, which measures the amount of new private investment in property, plant and equipment by private Canadian businesses, reached 135.8, an increase of 4% over last year.

PayNet said that the reading indicates organic growth in investment by Canadian private businesses. Additionally, although rate of investment has been slower, it remains positive.

“The Canadian economy is in a state of transition,” said William Phelan, president of PayNet. “This could be a lot worse. The consumer and the east are making up the slack in commodities and the west.”

Mining and Farming showed contractions falling by 4% and 10%, respectively. At the same time, professional services companies increased investment 28% while retailers were up 19%.

“In 12 to 24 months the economy should fully reshuffle from energy to manufacturing and the consumer,” Phelan pointed out. The PayNet Canadian Small Business Lending Index shows businesses serving energy sector Transportation -6% and Wholesale -20%

PayNet’s data reflects the fact that Canadian small businesses are outperforming the broader national economy, but that material strains exist in certain portions of the country.

Investment is contracting in the western provinces, particularly Alberta (-6%) and Saskatchewan (-8%), which is a direct symptom of the contracting in the mining and agriculture sectors. In the east, investment growth is up in Manitoba (4%), Ontario (8%) and Quebec (6%).

While U.S. small businesses are consistently borrowing at double-digit annual growth rates during 2015 ranging from 10% to 13%, Canadian small business originations are expanding at a more modest growth rate. As the U.S. economy gains momentum, it should soften the contraction in Canada.

The outlook for the next quarter shows a reset of the financial health of Canadian private businesses is underway, as financial health remains strong, despite it deteriorating recently.

“The Canadian Business Delinquency Index (CFLA CBDI) shows credit risk for Canadian small and medium sized businesses will rise slightly towards pre-recession levels over the next 12 months,” said Phelan.