Pace of US Corporate Cash Accumulation Edges Higher

Business confidence in the US appears to have softened as the pace of corporate cash accumulation inched up during the second quarter of 2013 and companies are indicating a greater likelihood to build cash during the third quarter, according to Association of Financial Professionals (AFP) in its latest Corporate Cash Indicators (CCI) survey.

Q213 indicators show that 38% of organisations held larger cash and short-term investment balances at the end of the June than they did at the end of March, while 26% had shed cash in the second quarter, indicating that US corporate treasurers are still not wholly convinced by recent improved data on the US economy.

Year-on-year, 34% of organisations had greater cash and short-term investment balances at the end of June 2013 than they had in June 2012, while 23% held smaller cash balances relative to a year ago.

The AFP’s quarterly CCI study, sponsored by State Street Global Advisors, measures recent and anticipated changes in US corporate cash reserves and has been running every quarter since January 2011.

The forward-looking indicator measuring expectations for increasing cash during Q313 swung from a reading of -5 for Q2 to +14, signalling a cautious shift in strategy at some organisations.

“Since this time last year, cash reserves have been fairly stable,” said Jim Kaitz, AFP’s president and chief executive officer (CEO).  “Where we are really seeing a jump is in expectations for the coming quarter. There is an expectation that the Fed will slow its rate of stimulus.  Long-term interest rates have jumped.  With an economic recovery that is bumpy, finance executives are wary once again.”

Meanwhile, the indicator for short-term investment aggressiveness shed 3 points to a reading of +1, as companies were slightly more aggressive in how they managed their cash, but less so than in the prior quarter.

The AFP plans to issue the next quarterly CCI survey on 28 October 2013 to coincide with its annual conference.


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