U.S. businesses are optimistic about the economy—so much so that they expect to deploy their short-term cash at the fastest pace since January 2015.
According to the latest Corporate Cash Indicators®, a quarterly survey of corporate treasury and finance executives conducted by AFP, the forward-looking indicator measuring the expected change of cash holdings during the first quarter of 2017 fell 11 points to a reading of -7. This was six points below its reading from a year ago, and its second lowest reading since AFP began collecting this data in January 2011. In addition, the indicator for short-term investment aggressiveness gained three points in the last quarter, moving from -5 to -2, although still signaling a more conservative posture with cash and short-term investments. The results are based on 227 responses received in January 2017.
The CCI also found that U.S. businesses continued to build their cash reserves during the last quarter of 2016, but the pace of accumulation was slightly slower than the previous quarter, decreasing three points to +16, while the year-over-year indicator decreased two points to +19.
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.
The CCI measure for short-term investment holdings during the current quarter decreased from +4 in October 2016 to -7 in January 2017. The lower the index reading, the greater the net percentage of organizations expected to spend cash and short-term investment holdings during the current quarter.
“The January CCI shows that corporates are optimistic about 2017 and the economic impact of the new Administration and Congress. They sense an environment that is more business friendly and, as a result, are more willing to deploy corporate cash in the form of capital expenditures,” said AFP President and CEO Jim Kaitz.
January 2017 AFP Corporate Cash Indicators®
Change in cash and short-term investment holdings (over past quarter): 4Q16 v. 3Q16 = +16
Change in cash and short-term investment holdings in the past year: 4Q16 v. 4Q15 = +19
Expected change in cash holdings during 1Q17 = -7
Aggressiveness of short-term investments = -2
AFP began collecting quarterly data in January 2011 and has now collected 25 data sets. See www.afponline.org/CCI for answers to frequently asked questions.
The next set is slated to be published April 24, 2017