Business financing in Canada is rising at the slowest rate in nine years, net new issuance of bonds and stocks is at an eight-year low, and bank financing has dried even more, according to a report from CIBC World Markets’ economics division.

Released Wednesday, the report titled “Money Drought” points out that short-term business credit has been falling for the past five quarters and it is now 11% lower than its level in early 2001.

This is the first time since the early 1990’s recession, that growth in short-term business credit has been in negative territory for such a prolonged period of time. Most of the weakness has been among large firms with small and mid-size firms enjoying better access to credit.

While the venture capital market has performed better than expected in 2002, CIBC says it is currently a shadow of its former self.

Corporate Canada is taking advantage of lower bond yields to shift to longer duration of debt. “This is just a different allocation of debt within a pie that is unlikely to grow in any meaningful way in 2003” said CIBC’s senior economists Benjamin Tal and Warren Lovely, authors of the report.

Prospects for 2004 look much better. A rebounding U.S. economy, on top of still-sturdy domestic fundamentals should see investment spending vault ahead at a much brisker pace, with the associated demand for corporate financing taking on a decidedly healthier tone.

CIBC World Markets report