During the last quarter of 2019, U.S. businesses continued to be cautious about the economy and responded by building cash and short-term investment holdings at a rapid pace, according to the AFP Corporate Cash Indicators^®, (CCI) a quarterly survey of senior corporate treasury and finance executives conducted by AFP.

The CCI’s quarter-over-quarter index increased 22 points to +31, and the year-over-year indicator increased by thirteen points to +33, which is the highest rate of cash accumulation since the inception of the CCI in 2011.

Early in the fourth quarter, organizations signaled they would build cash reserves significantly through the quarter. Not only did they keep their word, but they increased their holdings at a higher rate than planned. However, going into the new year, financial professionals are displaying some optimism and report they will be deploying cash in the first few months of the year. The forward-looking indicator measuring expectations for changes in cash holdings in the current quarter decreased 19 points from a reading of +16 to -3.   

Meanwhile, the CCI measure for short-term investment aggressiveness increased significantly, moving from -10 to -1 during the last quarter of 2019, still signaling a more conservative posture with cash and short-term investments.

These results are based on 143 responses from senior treasury and finance professionals this quarter.

“Late last year, uncertainty over Brexit in the UK, impeachment in Washington and the trade dispute with China led financial professionals to tighter their grip on cash in anticipation of adverse impact on their businesses,” said Jim Kaitz, president and CEO of AFP. “However, with the first phase of the trade deal with China done and the UK elections signaling a clearer path for Brexit, business leaders may begin to gradually mobilize cash in early 2020.”

January 2020 AFP Corporate Cash Indicators^®
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Change in cash and short-term investment holdings: 4Q19 v. 3Q19 = +31
Change in cash and short-term investment holdings over the past year: 4Q19 v. 4Q18 = +33
Expected change in cash holdings during 1Q 2020 = -3
Aggressiveness of short-term investments = -1

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 36 data sets. See www.afponline.org/CCI for answers to frequently asked questions. The next set is slated to be published April 27, 2020. For any press queries, please contact Melissa Rawak at [email protected].