Somewhat surprisingly, a recent index that tracks small business credit conditions showed an improvement during the first quarter of the year. The Experian/Moody’s Analytics Small Business Credit Index climbed 5.7 points to 109, driven largely by lower delinquency rates and stronger consumer purchasing. That was “counter to expectations for no change or a slight decline,” the report notes.

Small firms (those with up to 100 employees) have successfully whittled away at their debt. According to the report, their share of delinquent dollars dropped from nearly 13 percent in the first quarter of 2012 to 11.3 percent for the same period this year. Businesses’ ability to rein in labor costs, particularly with hourly employees, has played a role in this.

Lending conditions appear to be on the upswing as well. Just under one-quarter of respondents to the Federal Reserve’s April 2013 Senior Loan Officer Survey said that lending standards for small firms had eased somewhat over the past three months. Over the same period, demand for commercial loans from small firms had moderately strengthened, according to 21.5 percent of respondents.

But the news isn’t all rosy. The increase in the Experian/Moody’s index may have resulted in part from timing issues, the report says. While tax increases that went into effect this year were expected to impact consumer spending during the first quarter, many companies paid bonuses and dividends in December of last year, blunting some of the initial impact. Consumers’ smaller paychecks likely will have more of an impact on their spending later this year.

The improvements in credit conditions vary from one part of the country to another, and between businesses of different sizes. Businesses in the eastern U.S. are struggling due to a weak jobs recovery, federal spending cuts and euro zone weakness. The result? Delinquency rates for much of the East Coast vary from 17.4 to 27.6 percent, according to the report. On the other hand, delinquency rates in Arizona, Colorado, Wyoming and other mountain states range from 1.2 to 4.8 percent, well below the 11.2 percent national average.

What’s more, firms that currently employ less than 50 workers may take pains to remain that way, the report notes. One reason: provisions of the Affordable Care Act generally apply to firms of fifty or more employees. While companies with 20 to 49 employees continued to add jobs during the first part of the year, the pace has dropped from a year earlier.

Indeed, several other recent economic indicators showed less promising news. Manufacturing output dropped 0.5 percent in April, after increases of 0.3 percent in March and 0.9 percent in February, the Federal Reserve reports. Capacity utilization was at 77.8 percent, or 2.4 percentage points below the long-run (1972 -2012) average.

“Small firms will face headwinds for the remainder of 2013,” the report states. Among them: higher tax rates; the impact of sequestration, including furloughs at some government agencies, which will hit personal income; weak demand in other parts of the world, especially Europe; and a still shaky housing market in some regions of the U.S.