AFP Corporate Cash Indicators®

RSCH-20-CCI-January-PgHdr

January 2021 Results:

U.S. businesses continued to accumulate cash and short-term investment holdings during the fourth quarter of 2020 and did so at a more rapid pace than the previous quarter. The quarter-over-quarter index increased twenty points to +39. While the year-over-year indicator increased by five points to +29. The forward-looking indicator decreased 12 points from last quarter’s reading of -4 to -16. Over one-third of companies planning to draw down on their cash holdings in the first quarter of 2021 are doing so to invest in their businesses, which suggests some business leaders are leaning towards a more positive outlook than we have seen in the past few months.

 

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AFP Corporate Cash IndicatorsJanuary 21October 20July 20April 20
Change in Cash Holdings (Over the Past Quarter)+39+19+20+24
Change in Cash Holdings (Over the Past Year)+29+24+29+32
Expected Change in Cash Holdings (During Current Quarter)-16-4-8-15

 

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How to read the results:

The indicators measure recent and anticipated changes in corporate cash balances by calculating the percentage of survey respondents reporting an increase (or expected increase) in cash holdings minus the percentage reporting a decline (or expected decline). Declining indicators are indicative of increasingly confident businesses. Conversely, rising indicators suggest growing pessimism.  

Why you should care about corporate cash holdings and the AFP Corporate Cash Indicators?

The reason is simple: all other things held constant, optimistic companies are more likely to deploy their cash holdings. Confident companies use their cash to make growth-orientated expenditures (e.g., increased capital expenditures, merger & acquisitions and hiring) and to increase dividend payouts and share repurchases. Conversely, pessimistic executives are likely to retain their cash holdings. 

The AFP Corporate Cash Indicators (AFP CCI), provide treasury and finance professionals, policymakers and market analysts with timely data on a determinant of economic activity: corporate cash levels. 

About the AFP Corporate Cash Indicators

AFP Corporate Cash Indicators is a trademark of the Association for Financial Professionals. All AFP Corporate Cash Indicators® survey questions, data and reports are the copyrights of the Association for Financial Professionals, and all rights are reserved. For information about including the AFP CCI on your site, please contact [email protected].