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Study: U.S. Firms Continued to Exhibit Caution with Their Cash Holdings in Third Quarter 2019

AFP October 2019 Corporate Cash Indicators finds U.S. firms are planning to significantly build cash in fourth quarter 2019.

October 28, 2019 – Bethesda, Md. -- During the third quarter of 2019, U.S. businesses continued to accumulate cash and short-term investment holdings, though at a gradual pace, according to the AFP Corporate Cash Indicators®, (CCI) a quarterly survey of senior corporate treasury and finance executives conducted by AFP.

The latest CCI’s quarter-over-quarter index increased one point to +9, and the year-over-year indicator increased by nine points to +20. These readings suggest that treasury and finance professionals are uncertain about the economy and exhibiting caution.

Organizations continued to build cash reserves through the summer, but at a slightly slower pace than anticipated. This group anticipates cash accumulation will continue to accelerate rapidly throughout the fourth quarter; the forward-looking indicator measuring expectations for changes in cash holdings in the current quarter increased four points to +16. This figure is one of the highest AFP has recorded for a forward-looking indicator since it began gathering this data in January 2011.

Meanwhile, the indicator for short-term investment aggressiveness decreased significantly, moving from -3 to -10, signaling a continued conservative posture with cash and short-term investments. This is the lowest this figure has been since AFP began reporting on these numbers in 2011. Recent interest rate cuts by the Federal Reserve Bank and the likelihood that there are more to come are prompting treasury and finance professionals to be conservative with their organizations’ short-term instruments. 

These results are based on 120 responses from senior treasury and finance professionals this quarter.

“With trade tensions between the U.S. and China continuing and fears of a potential recession, business leaders aren’t taking any chances,” said Jim Kaitz, president and CEO of AFP. “Organizations are understandably reluctant to spend any money that they don’t have to. Cash accumulation appears to be the new normal.”

October 2019 AFP Corporate Cash Indicators®
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Change in cash and short-term investment holdings: 3Q19 v. 2Q19 = +9
Change in cash and short-term investment holdings over the past year: 3Q19 v. 3Q18 = +20
Expected change in cash holdings during 4Q 2019 = +16
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 36 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published January 27, 2020. For any press queries, please contact Melissa Rawak at mrawak@afponline.org.

About AFP®
Headquartered outside of Washington, D.C. and located regionally in Singapore, the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of treasury and finance 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 treasury and finance. Each year, AFP hosts the largest networking conference worldwide for more than 7,000 corporate financial professionals.


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