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Feb 4 (Reuters) - U.S. small businesses boosted borrowing in December, pushing a broad lending index to its highest level in nearly seven years and signaling that economic growth may continue apace in the early part of this year.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, rose to 121.6 in December from an upwardly revised 114.6 in the prior month, PayNet said on Tuesday.
That was the highest level since March 2007, the data showed, and was up 5 percent from a year earlier. A rise in the index is historically correlated with stronger U.S. economic growth a quarter or two in the future.
"We are fairly optimistic there will be some growth coming at least from the small business portion of the economy," PayNet founder Bill Phelan said. The rate of growth is "not too frothy, and not too tepid either," he said.
Small companies typically take out loans to buy new tools, factories and equipment, so more borrowing can be an early signal of increased hiring ahead.
It's a good sign for the Federal Reserve, which is dialing down its massive bond-buying program in a nod to stronger growth and a rapid decline in the unemployment rate, which registered 6.7 percent in December.
The Fed, now chaired by Janet Yellen after Ben Bernanke's two-term stint ended last Friday, plans to end the bond-buying entirely before the year is out unless the economy does not continue to improve as expected.
Other recent data have not been as rosy, including reports Monday that showed U.S. manufacturing activity slowed sharply in January on the back of the biggest drop in new orders in 33 years.
Still, economists blame most of that weakness on frigid weather, and expect a rebound in coming months.
The U.S. economy grew at a 3.2 percent annual pace in the fourth quarter of last year, after growing at a 4.1 percent rate in the prior quarter.
A separate index showed small businesses have begun taking on slightly more risk, with delinquencies ticking up marginally from record lows.
Delinquencies of 31 to 180 days in December ticked up to 1.47 percent of all loans made, from 1.46 percent in November, according to the Thomson Reuters/PayNet Small Business Delinquency Index.
A measure of accounts overdue as a percentage of all loans hit a high of 4.73 percent in August 2009. The record low was 1.44 percent last October.
PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading U.S. lenders. (Reporting by Ann Saphir in San Francisco; Editing by Lisa Shumaker)