October 25, 2021 – Bethesda, Md. – During the third quarter of 2021, U.S. business leaders continued to build cash and short-term investment holdings, though at a slower rate than the previous quarter, according to the AFP Corporate Cash Indicators®, (CCI), a quarterly survey of senior corporate treasury and finance executives conducted by AFP, underwritten by Wells Fargo Asset Management.

The latest CCI’s quarter-over-quarter index decreased 22 points to +21, and the year-over-year indicator also decreased by 24 points to +21. These readings suggest that organizations are accumulating cash reserves at a gradual pace in both the past quarter and year.

Most organizations that increased cash holdings during the past quarter did so primarily due to improved business performance, while others were looking to preserve cash to safeguard against any upcoming uncertainty.

In early July, financial professionals signaled they were looking to build cash reserves during the quarter, as reported in the July 2021 CCI report. They kept to their word, though they accumulated cash at a slightly higher rate than anticipated. A significant share of companies attributes the expected increase in cash holdings in the last three months of 2021 to improved business performance, with a few business leaders reporting they would be building cash at their companies as a defensive measure to safeguard against uncertainty. Those financial professionals whose organizations are expecting to decrease cash and short-term investments during the current quarter indicate their actions are driven by worsening business performance and some attribute this to investments to strategically grow their business.

These results are based on 129 responses from senior treasury and finance professionals this quarter.

“The U.S. economy continues to be facing various headwinds, ranging from the resurgence of the COVID-19 pandemic, severe supply chain issues, record employee departures, roadblocks on Capitol Hill and more,” said Jim Kaitz, president and CEO of AFP. “It is no surprise that business leaders remain cautious when making investment decisions as they wait for a more stable environment.”

“We believe worries over the debt ceiling and mounting inflationary pressures could make it increasingly difficult for investors to confidently predict the future,” Yeng Butler, Head of Investment Solutions and Liquidity Client Group, Wells Fargo Asset Management. “We are seeing some investors continuing to assess cash and short-term investment holdings and overall balance sheet positioning in an attempt to safeguard against economic uncertainty. At the same time, many corporations have also benefitted from robust earnings. We are optimistic that improving business performance will continue to show momentum into 2022.”

October 2021 AFP Corporate Cash Indicators®

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Change in cash and short-term investment holdings in the past quarter: 3Q21 v. 2Q21 = +21
Change in cash and short-term investment holdings over the past year: 3Q21 v. 3Q20 = +21
Expected change in cash holdings during 4Q21 = +18
Aggressiveness of short-term investments = -10

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.

AFP began collecting quarterly data in January 2011 and has now collected 44 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published January 24, 2022. For any press queries, please contact Melissa Rawak at [email protected].

About AFP®
As the certifying body in treasury and finance, the Association for Financial Professionals (AFP) established and administers the Certified Treasury Professional (CTP) and Certified Corporate Financial Planning and Analysis Professional (FPAC) credentials, setting the standard of excellence in the profession globally. AFP’s mission is to drive the future of finance and treasury and develop the leaders of tomorrow through certification, training, and the premier event for corporate treasury and finance.