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Survey: U.S. Businesses Plan to Spend Cash, Treasurers Say

  • By Staff Writers
  • Published: 1/26/2015

Amid an expectation of further U.S. economic growth, corporate treasurers overwhelmingly expect their companies to deploy their cash in the coming quarter, according to the AFP Corporate Cash Indicators ® (AFP CCI) released today.

The AFP CCI, published each quarter by the Association for Financial Professionals (AFP), 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 indicators are underwritten by Capital One Bank.

The forward-looking indicator measuring expectations in the change of cash holdings is at -14, down 11 points from the previous quarter and down 13 points from a year ago, indicating that companies plan to spend their cash. This is the lowest reading of anticipated future cash since AFP began tracking the indicators 17 quarters ago.

During the fourth quarter, corporate treasurers did pick up the pace of cash accumulation, a trend that typically takes place near year end. For the fourth quarter of 2014, the indicator measuring the quarterly change in cash holdings was +13, up from the October reading of +6. Meanwhile, the year-over-year indicator rose from -4 to +9, but both indicators were significantly below their fourth quarter 2013 values.

The indicator for short-term investment aggressiveness rose from zero to +5 indicating that companies are seeking greater yield from their cash holdings.

“Despite recent scares in Europe and Asia, U.S. businesses will spend cash this quarter,” said Jim Kaitz, AFP’s president and CEO. “Their growing confidence is also reflected in a new quest for yield.”

January 2015 AFP Corporate Cash Indicators®
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Change in cash holdings: 4Q14 v.3Q14 = +13

Change in cash holdings: 4Q14 v. 4Q13 = +9

Expected change in cash holdings during 1Q15 = -14

Aggressiveness of short-term investments = +5

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 17 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published April 27, 2015.

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