WASHINGTON – Business confidence appears
to have softened as the pace of corporate cash accumulation inched up during
the second quarter of 2013 and companies are indicating a greater likelihood to
build cash during the third quarter, according to the July 2013 AFP Corporate Cash Indicators™ (AFP CCI).
The AFP CCI™ are calculated each quarter
by the Association for Financial Professionals (AFP) and underwritten by State
Street Global Advisors.
Cash Indicators™ for 2Q2013
+12 Change in cash holdings: 2Q13 v. 1Q13
in cash holdings: 2Q13 v. 2Q12
+14 Expected change in cash holdings during 3Q13
Each of these indicators measure recent
and anticipated changes in corporate cash balances by calculating increase
percentage minus decrease percentage.
Each quarter, AFP asks select members representing a broad cross section of
U.S. businesses the same questions: whether their company’s short-term holdings
increased or decreased in the past year and past quarter; whether investment
selections for those holdings changed; and whether they expect cash holdings to
increase or decrease in the coming quarter. AFP member companies have agreed to
participate in this ongoing study on a long-term basis.
Participants manage their companies’
cash and short-term investment portfolios and are fully aware of their
companies' liquidity needs and business strategies. Since corporate decisions
to grow/shrink the size of cash and short-term investment portfolios reflect
their business outlook and direction, changes reported by this broad group of
companies are indicators of economic activity.
Second quarter 2013 indicators show that
38 percent of organizations held larger cash and short-term investment balances
at the end of the June quarter than they did at the end of March, while 26
percent had shed cash in the second quarter.
Year-over-year, 34 percent of
organizations had greater cash and short-term investment balances at the end of
June 2013 than they had in June 2012, while 23 percent held smaller cash balances
relative to a year ago.
The forward-looking indicator measuring
expectations for increasing cash during the third quarter of 2013 swung from a
reading of -5 for Q2 to +14, signaling a cautious shift in strategy at some organizations.
this time last year, cash reserves have been fairly stable,” said Jim Kaitz,
AFP’s president and CEO. “Where we are
really seeing a jump is in expectations for the coming quarter. There is an
expectation that the Fed will slow its rate of stimulus. Long-term interest rates have jumped. With an economic recovery that is bumpy,
finance executives are wary once again.”
Meanwhile, the indicator for short-term
investment aggressiveness shed 3 points to a reading of +1, as companies were
slightly more aggressive in how they managed their cash, but less so than in
the prior quarter.
AFP began collecting quarterly data in
January 2011 and has now collected 11 data sets. See www.afponline.org/CCI. The next set is slated to be published October
Corporate Cash Indicators™ is a trademark of the Association for
Financial Professionals. All AFP
Corporate Cash Indicators™ survey questions and reports are the
copyrights of the Association for Financial Professionals, and all rights are
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