Finance executives said they planned to accumulate corporate cash reserves in the second quarter of 2017—and they did so, but at a greater rate than planned, according to the AFP July 2017 Corporate Cash Indicators®.
In the latest CCI, a quarterly survey of corporate treasury and finance executives conducted by AFP, the quarter-over-quarter index increased to +16. Entering the quarter, the anticipated quarter-over-quarter index was +3. This marks the fifth consecutive quarter where organizations accumulated cash at a greater rate than they anticipated entering the quarter, corresponding with a long string of disappointments in Washington and ongoing concern about escalating geopolitical risk.
Finance professionals also said that they expect cash accumulation will continue through the summer; the forward looking indicator measuring expectations for changes in cash holdings during the third quarter of 2017 increased five points from +3 to +8. July CCI results are based on 199 responses from senior treasury and finance professionals this quarter.
“Though recent job numbers are encouraging, organizations’ reluctance to deploy more corporate cash likely is due to prevailing economic uncertainty—both domestic and global,” said Jim Kaitz, president and chief executive of AFP. “Corporate treasury and finance executives are responding quickly, and trying to get ahead of the uncertainty, by accelerating cash accumulation.”
The year-over-year indicator, showing the change in organizations accumulating cash in the past year, increased two points to +18. The indicator for short-term investment aggressiveness gained five points last quarter, moving from -1 to +4, signaling a more aggressive posture with cash and short-term investments. This is likely the result of two increases in the Fed Funds rate in 2017 offering opportunities for companies to extend maturities to enhance yield while protecting principal and ensuring liquidity.
July 2017 AFP Corporate Cash Indicators®
- Change in cash and short-term investment holdings (over past quarter): 3Q17 v. 2Q17 = +16
- Change in short-term holdings in the past year: 3Q17 v. 2Q17 = +18
- Expected change in cash holdings during 3Q2017 = +8
- Aggressiveness of short-term investments = +4
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.
AFP began collecting quarterly data in January 2011 and has now collected 27 data sets. See www.afponline.org/CCI for more data on the CCI.