Study: U.S. Firms Accumulated Cash in 2Q18 At A Slower Pace Than The Previous Quarter

AFP July 2018 Corporate Cash Indicators® finds companies are still reluctant to invest or spend their growing cash reserves

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Association for Financial Professionals

Jul 30, 2018, 10:07 ET

BETHESDA, Md., July 30, 2018 /PRNewswire/ -- U.S. companies continued to accumulate cash during the second quarter of 2018, but at a slower pace than they did in the previous quarter. Strong domestic employment numbers may have instilled some confidence among business leaders during the spring of 2018, but not enough to encourage them to reduce their cash holdings, according to the latest AFP Corporate Cash Indicators® (CCI).

In the latest CCI, a quarterly survey of corporate treasury and finance executives conducted by the Association for Financial Professionals, U.S. businesses increased their cash and short-term investment holdings in 2Q18 at a slower pace than the previous quarter, as the quarter-over-quarter index reading decreased 13 points to +5. The year-over-year indicator decreased only one point to +16, signaling organizations had continued to build their cash holdings in the past year.

Treasury and finance professionals anticipate that they will continue to hold their cash reserves through the summer. The forward-looking indicator, measuring expectations for changes in cash holdings in the third quarter, increased 4 points from their predictions last quarter to a reading of +3.

AFP began collecting quarterly data in January 2011 and has now collected 31 data sets. See the AFP website for more data on the CCI. The results of the July 2018 CCI are based on 144 responses from senior treasury and finance professionals. The next set will be published October 29, 2018. For press queries, please contact Melissa Rawak at [email protected].

More results from July CCI:

34 percent of organizations held larger cash and short-term investment balances at the end of Q2 2018 than at the end of Q1 2018, while 29 percent reduced cash holdings in the past three months.
40 percent had greater cash and short-term investment balances at the end of Q2 2018 than they had one year earlier, while 24 percent held smaller cash balances relative to a year ago.
25 percent anticipate expanding cash and short-term investment balances over the next three months, while 22 percent plan to reduce these balances.
13 percent of organizations were more aggressive with their short-term investments in Q2 2018 while 4 percent were more conservative.

"The U.S. economy may be on solid footing, but treasury and finance executives were not overly influenced by the data," said Jim Kaitz, president and CEO of AFP. "The uncertainty stemming from threats of a trade war are concerning to business leaders. Additionally, tensions with our allies have exacerbated geopolitical risks. Though organizations have trimmed cash accumulation somewhat their senior management continues to be watchful."

July 2018 AFP Corporate Cash Indicators®

Change in cash and short-term investment holdings over past quarter: 2Q18 v. 1Q18 = +5
Change in cash and short-term investment holdings over the past year: 2Q18 v. 1Q18 = +16
Expected change in cash holdings during 3Q18 = +3
Aggressiveness of short-term investments = +9

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. 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.

About AFP®

Headquartered outside Washington, D.C., the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of its members and their organizations. AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials, which set standards of excellence in finance. Each year, AFP hosts the largest networking conference worldwide for over 6,500 corporate finance professionals.

SOURCE Association for Financial Professionals