Survey: U.S. Firms Continue to Accumulate Cash in 3Q15

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American businesses remained cautious deploying cash in 3Q15, but aren't building their holdings as much as they indicated they would last quarter, according to the October 2015 results of the AFP Corporate Cash Indicators. The CCI is underwritten by Capital One Bank.

October 2015 AFP Corporate Cash Indicators

Change in cash holdings: 3Q15 v.2Q15 = +6
Change in cash holdings: 3Q15 v. 3Q14 = +13
Expected change in cash holdings during 4Q15 = +8
Aggressiveness of short-term investments = - 2

The indicators measure recent and anticipated changes in corporate cash balances by calculating increase percentage minus decrease percentage.

In addition, the CCI measures for short-term investment aggressiveness showed a more conservative investment posture for the first time in more than three years, decreasing from a neutral reading of 0 to -2 during the third quarter.

"The almost unchanged corporate cash accumulation sentiment shown in this quarter's survey may be a reflection of the prevailing economic uncertainty and volatility that U.S. corporates are experiencing," said Patrick Moore, Executive Vice President and head of Capital One Bank's Treasury Management's Product Management & Innovation group. "With a rate hike on the horizon and the consequent expected drag on the U.S. economy, corporations are reluctant to make large investments and will continue to accumulate cash."

For the third quarter of 2015, the indicator measuring the quarterly change in cash holdings was +6. While this indicates that companies were still accumulating cash, it also shows a significant decrease from the July reading of +18. Meanwhile, the year-over-year indicator stayed the same at +13.  The forward-looking CCI measure tracking expectations for changes in cash holdings during the current quarter came in at +8, a decrease of 3 points from what was reported in July's CCI report and up 11 points from a year earlier. While every measure shows the continued accumulation of cash, these indicators do suggest that organizations will stockpile less new cash than they did during the prior three months. 

"Treasury and finance professionals remain reluctant to deploy their organizations' cash balances due to global economic uncertainty and uncertainty over the timing of a U.S. interest-rate hike," said AFP President and Chief Executive Officer Jim Kaitz.

AFP began collecting quarterly data in January 2011 and has now collected 20 data sets. See www.afponline.org/CCI for this quarter's results and answers to frequently asked questions. The next set is slated to be published January 26, 2016.

Each quarter, AFP asks a select group of finance professionals 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.

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 FP&A 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.