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.
Published each fiscal quarter, 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®
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.
AFP began collecting quarterly data in January 2011 and has now collected 23 data sets. See http://www.afponline.org/CCI/ for answers to frequently asked questions. The next set is slated to be published October 31, 2016.