According to PayNet’s Q1/17 Small Business Credit Outlook, other than a brief bump after the election, private companies still are holding back on investments. They never went all-in on investments post-election like the stock market did, and now, they seem to be firmly entrenched in a “show me” position. The further policy uncertainty persists, the longer the private companies are likely to remain on hold.

The Thomson Reuters/PayNet Small Business Lending Index (SBLI) seasonally adjusted originations increased 4% from 128.9 in February 2017 to 134.0 in March 2017. The February 2017 index value was restated downward from 132.9 to 128.9. Compared to March 2016, the index is down 1%.

PayNet noted that the industry sectors showing growth momentum underway include arts and entertainment, administrative and support, waste management services, and information. The sectors holding back the economy are in traditionally strong ones: agriculture and transportation.

The health care sector is indicative of the policy paralysis, according to PayNet, as it decreased 13.1% compared to one year ago. PayNet noted this further 4.6% decrease from earlier months indicates the dampening effects on the economy from lack of certainty on policies and Washington, D.C.’s outsized impact on the economy.

PayNet forecast private company defaults to rise in 2017 as trends in loans past due, major industry sectors and macro-economic factors provide the basis for a forecast for higher defaults.

PayNet noted more recent and frequent loan delinquencies are evident with a .13% increase nationally to 1.34% as of this report versus 1.21% for the same time last year. Rising financial risk in industry sectors provided added evidence for higher defaults. Higher delinquencies in transportation (+0.43%), retail (+0.20%) and agriculture (+0.17%) represent rising risks in major industry sectors.

For these reasons, PayNet forecasts the default rate of private businesses to climb to 2.1% in 2017 from 1.8% last year, which marks a return to normalized credit conditions for private businesses after the all-time lows of recent years.