Dive Brief:
- U.S. businesses are cautious about the economy, and are rapidly building cash and short-term investment holdings, findings from a quarterly cash survey show.
- The Association for Financial Professionals' cash index increased 22 points, to 31, and the year-over-year indicator increased by 13 points, to 33.
- The year-over-year result is the highest rate of cash accumulation since the inception of the index, called the AFP Corporate Cash Indicators (CCI), in 2011. The results are based on 143 responses from senior treasury and finance professionals responding in January.
Dive Insight:
By building their cash reserves significantly through the fourth quarter of 2019, finance leaders took the steps they said they would take when surveyed last quarter. "Not only did they keep their word, but they increased their holdings at a higher rate than planned," AFP said in the survey report.
Even so, survey respondents were open to spending money. "Financial professionals are displaying some optimism and report they will be deploying cash in the first few months of the year," AFP said.
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. That signals a more conservative posture with cash and short-term investments, AFP says.
"Late last year, uncertainty over Brexit in the UK, impeachment in Washington and the trade dispute with China led financial professionals to tighten 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."
