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Study: U.S. Firms Accumulated Cash in 1Q18 At A Faster Pace Than The Previous Quarter

AFP April 2018 Corporate Cash Indicators® finds companies hastened cash accumulation in part due to fears over trade wars.

April 30, 2018 -- Bethesda, Md. -- U.S. companies appeared to be ready to deploy cash earlier in 2018, but concerns over festering trade wars with China, Mexico and Canada and rising geopolitical concerns convinced treasury and finance executives to return to cash accumulation, according to the latest AFP Corporate Cash Indicators®.

AFP began collecting quarterly data in January 2011 and has now collected 29 data sets. See www.afponline.org/CCI for answers to frequently asked questions. Also, any press queries, please contact Melissa Rawak at mrawak@afponline.org.  The next set is slated to be published July 30 2018.

In the latest CCI, a quarterly survey of corporate treasury and finance executives conducted by the Association for Financial Professionals, U.S. businesses increased their cash significantly during the first quarter of 2018, as the quarter-over-quarter index reading increased three points to +18. The year-over-year indicator decreased by six points to +17, signaling some abatement of cautiousness among treasury and finance professionals in the past year.

In spite of prevailing uncertainty, this group once again anticipates a minimal deployment of cash during Spring 2018 signaling cautious optimism. The forward-looking indicator, measuring expectations for changes in cash holdings in the current quarter, is unchanged from their predictions last quarter at a reading of -1.

More results from the April CCI:

  • 44 percent held larger cash and short-term investment balances at the end of Q1 2018 than they did at the end of Q4 2017, while 26 percent reduced cash holdings in the past three months.
  • 37 percent had greater cash and short-term investment balances at the end of Q1 2018 than they had one year earlier, while 20 percent held smaller cash balances relative to a year ago.
  • 24 percent anticipate expanding cash and short-term investment balances over the next three months, while 25 percent plan to reduce these balances.
  • 13 percent were more aggressive with their short-term investments in Q1 2018 while 2 percent were more conservative. The +11 reading for this index is the highest on record since AFP began collecting this data in January 2011,

The results of the April 2018 CCI are based on 170 responses from senior treasury and finance professionals.

“The optimism generated from corporate tax reform seems to have done little to persuade organizations to spend their cash during the early months of 2018,” said Jim Kaitz, president and CEO of AFP. “The uncertainty stemming from threats of a trade war and geopolitical tensions have concerned treasury and finance executives. Washington must deliver on its promise of less regulation, alleviate uncertainty and ease geopolitical crises for businesses to regain their confidence in the economy and begin to deploy their cash.”

 

April 2018 AFP Corporate Cash Indicators®

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Change in cash and short-term investment holdings (over past quarter): 1Q18 v. 4Q17 = +18

Change in cash holdings: 1Q18 v. 4Q17 = +17      

Expected change in cash holdings during 2Q18 = -1

Aggressiveness of short-term investments = +11

 

The 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.

About AFP®

Headquartered outside Washington, D.C., the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of its members and their organizations. AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials, which set standards of excellence in finance. Each year, AFP hosts the largest networking conference worldwide for over 6,500 corporate finance professionals.

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