U.S.-based finance executives said they planned to accumulate corporate cash reserves in the second quarter of 2017—and they did so, but at a greater rate than planned, according to the AFP July 2017 Corporate Cash Indicators.
In the latest CCI, a quarterly survey of corporate treasury and finance executives conducted by the Association for Financial Professionals, the quarter-over-quarter index increased to +16.
Entering the quarter, the anticipated quarter-over-quarter index was +3. This marks the fifth consecutive quarter where organizations accumulated cash at a greater rate than they anticipated entering the quarter, corresponding with a long string of disappointments in Washington and ongoing concern about escalating geopolitical risk.
Finance professionals also said that they expect cash accumulation will continue through the summer; the forward looking indicator measuring expectations for changes in cash holdings during the third quarter of 2017 increased five points from +3 to +8. July CCI results are based on 199 responses from senior treasury and finance professionals this quarter.
“Though recent job numbers are encouraging, organizations’ reluctance to deploy more corporate cash likely is due to prevailing economic uncertainty—both domestic and global,” said Jim Kaitz, president and chief executive of AFP. “Corporate treasury and finance executives are responding quickly, and trying to get ahead of the uncertainty, by accelerating cash accumulation.”
The year-over-year indicator, showing the change in organizations accumulating cash in the past year, increased two points to +18.
The indicator for short-term investment aggressiveness gained five points last quarter, moving from -1 to +4, signaling a more aggressive posture with cash and short-term investments. This is likely the result of two increases in the Fed Funds rate in 2017 offering opportunities for companies to extend maturities to enhance yield while protecting principal and ensuring liquidity.