U.S. Businesses Show Renewed Enthusiasm; More Spend Ahead, Say Treasurers

AFP Releases October 2014 Corporate Cash Indicators®

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Association for Financial Professionals

Oct 27, 2014, 08:05 ET

WASHINGTON, Oct. 27, 2014 /PRNewswire/ -- U.S. companies are spending their cash and expect to spend even more in the coming quarter, according to the AFP Corporate Cash Indicators^® (AFP CCI) released today.

Corporate treasurers surveyed indicated that U.S. businesses had sharply slowed the accumulation of short-term cash during the third quarter to the point that their cash holdings were smaller than they had been a year earlier.

The AFP CCI are calculated each quarter by the Association for Financial Professionals (AFP). The AFP CCI measure 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.

As predicted last quarter, the burst in cash accumulation that we saw over the summer was short lived. For the third quarter of 2014, the indicator measuring the quarterly change in cash holdings is down six points from the July reading at +6.

The year-over-year indicator dropped a full 31 points from +27 to -4 showing that U.S. companies are putting their cash hoards to work.

In the coming quarter, corporate treasurers do anticipate spending more cash. The forward-looking indicator measuring expectations in the change of cash holdings dropped from +10 to -3 indicating that more companies anticipate contracting their short-term cash holdings than building cash.

Meanwhile, the indicator for short-term investment aggressiveness dropped from +2 to zero, indicating that companies have not changed their stance in terms of permissible short-term investments, though some have become very slightly more aggressive.

"This is more than a blip in spending," said Jim Kaitz, AFP's president and CEO. "Despite recent scares, U.S. businesses are indeed showing renewed enthusiasm."

October 2014 AFP Corporate Cash Indicators®
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Change in cash holdings: 3Q14 v. 2Q14 = +6

Change in cash holdings: 3Q14 v. 3Q13 = -4

Expected change in cash holdings during 4Q14 = -3

Aggressiveness of short-term investments = 0

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 16 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published January 26, 2015.

ABOUT AFP ^®Headquartered outside Washington, D.C., the Association for Financial Professionals (AFP) is the professional society that represents finance executives globally. AFP established and administers the Certified Treasury Professional and Certified Corporate Financial Planning and Analysis Professional credentials, which set standards of excellence in finance. The quarterly AFP Corporate Cash Indicators serve as a bellwether of economic growth. The AFP Annual Conference is the largest networking event for corporate finance professionals in the world.

AFP, Association for Financial Professionals, Certified Treasury Professional, and Certified Corporate Financial Planning & Analysis Professional are registered trademarks of the Association for Financial Professionals.© 2014 Association for Financial Professionals, Inc. All Rights Reserved.

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SOURCE Association for Financial Professionals