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Cash Reserves Hold Steady in 4Q13, but Investment Increases

  • By Staff Writers
  • Published: 1/27/2014

U.S. business confidence remained even in the final quarter of 2013, with organizations holding steady amounts of cash and investing those balances slightly more aggressively, according to the January 2014 AFP Corporate Cash Indicators™ (AFP CCI).
Calculated each quarter by AFP and underwritten by State Street Global Advisors, the AFP CCI measure 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.

The quarter-to-quarter indicator remained steady at +19 as 44 percent of responding organizations reported larger short-term holdings at the end of the fourth quarter compared to 21 percent that reported smaller short-term holdings.

The year-over-year indicator shed one point for a reading of +20 as 48 percent of responding organizations expanded cash balances from 4Q12 to 4Q13, compared to 25 percent that shrunk balances over the period.  The indicator reading is off a point from the previous quarter but matches the fourth quarter 2012 reading.

Looking ahead, the January forward indicator is down seven points from October for a reading of -1, as 28 percent of organizations expect to increase short-term holdings vs. 29 percent that expect to reduce short-term holdings.  This is three points up from the January 2012 survey.

Meanwhile, the indicator for short-term investment aggressiveness increased by five points to a reading of +7, up seven points from a year ago.

“Treasurers are seeing some opportunities for investment,” said Jim Kaitz, AFP's president and CEO.  “As expectations rise for higher interest rates, they are becoming marginally more aggressive in the ways they invest their corporate cash.”

January 2014 AFP Corporate Cash IndicatorsTM
Change in cash holdings: 4Q13 v. 3Q13 = +19
Change in cash holdings: 4Q13 v. 4Q12 = +20
Expected change in cash holdings during 1Q14 = -1
Aggressiveness of short-term investments = +7

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 13 data sets. See for answers to frequently asked questions. The next set is slated to be published April 28, 2014.

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