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Study: U.S. Firms Hoarded Cash in 2Q16, Anticipate Accelerated Accumulation Thru Summer

AFP July 2016 Corporate Cash Indicators® reveals companies accumulated short-term corporate cash at a far quicker pace during the second quarter of 2016 than in the previous quarter.

July 25, 2016 -- Bethesda, Md. -- Concerned about Brexit, a tepid domestic economy and continued sluggishness in the global economy, American companies in the second quarter of 2016 returned to accumulating cash at a fast pace, according to the AFP Corporate Cash Indicators® (AFP CCI). 

In fact, American firms accumulated short-term corporate cash balances at a far quicker pace during the second quarter of 2016 than in the previous quarter. The quarter-over-quarter index surged 9 points to +8, signaling a significant softening in organizations' business confidence. The year-over-year indicator increased by 4 points to +14, suggesting that organizations continue to focus on building their cash reserves. 

For any media queries, please contact Melissa Rawak at mrawak@afponline.org. To access the CCI for this quarter and analysis please visit www.afponline.org/CCI

Published each fiscal quarter by the Association for Financial Professionals, the AFP CCI measures changes in corporate cash holdings quarter-to-quarter and year-over-year, as well as the expected change in short-term investment and cash accumulation in the coming quarter. 

Finance professionals anticipate that cash accumulation will continue at an accelerated pace through the summer. The forward looking indicator measuring expectations for changes in cash holdings during the third quarter of 2016 increased from a reading of +7 to +16, the highest reading since July 2011 and the second highest reading since AFP began tracking this data in January 2011.

"The July CCI shows that corporates have stepped on the brakes amid growing economic and political uncertainty and are expecting to accumulate more cash in the quarter," said AFP President and CEO Jim Kaitz. "Unless there is a clear opportunity, organizations will remain reluctant to deploy their cash." 

The CCI measure for short-term investment aggressiveness indicated a slightly more conservative investment posture as compared to last quarter, decreasing from a reading of +1 to -1 during the second quarter of 2016. 

July 2016 AFP Corporate Cash Indicators®
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Change in cash and short-term investment holdings (over past quarter): 2Q16 v. 1Q16 = +8
Change in cash and short-term investment holdings in the past year: 2Q16 v. 2Q15 = +14
Expected change in cash holdings during 3Q16 = +16
Aggressiveness of short-term investments = -1 

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. 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 23 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published October 31, 2016.

ABOUT AFP®

Headquartered outside Washington, D.C., the Association for Financial Professionals (AFP) is the professional society that represents finance executives globally. AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials, which set standards of excellence in finance. The quarterly AFP Corporate Cash Indicators serve as a bellwether of economic growth. The AFP Annual Conference is the largest networking event for corporate finance professionals in the world.

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