NEW YORK (AP) — Small businesses improved their credit during the first three months of the year, with the biggest gains coming in the western part of the country, according to a survey released Tuesday.
Consumer spending was stronger than expected early in the year, boosting small businesses' revenue and helping them to pay down past-due bills, according to Experian, the credit rating service, and Moody's Analytics. The companies' Small Business Credit Index rose 5.7 points to 109 in the first quarter.
It's not clear whether the improvement in small business credit can be sustained, Experian and Moody's said. The impact of an increase in workers' Social Security taxes appeared later than anticipated, in late March and April, and consumers are expected to spend less in the second and third quarters. And while businesses in the West are doing well at improving their credit, many companies in the eastern part of the country are still contending with federal budget cuts that took effect March 1, reducing their revenue.
Experian and Moody's said that many companies have reduced workers' hours to lower their expenses and free up cash to pay their bills. It also found that hiring among companies with 20 to 49 workers has slowed since Jan. 1 — a sign that many small businesses may be trying to avoid the Affordable Care Act's requirement that companies with 50 or more workers provide health insurance for them.
In the West, credit has been helped by a strong housing market recovery in Colorado, and job growth in San Francisco and Los Angeles, Experian and Moody's said.
But credit is suffering in the East, which has a high concentration of federal contractors. The region is also being affecting by the continuing economic problems in European countries, and its manufacturing industry is weak, Experian and Moody's said.