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

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.

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.