During the second quarter of 2019, US companies remained apprehensive about the economy. Similar to last quarter, they continued to build cash and short-term investment holdings, according to the Association for Financial Professionals (AFP) Corporate Cash Indicators (CCI), a quarterly survey of senior corporate treasury and finance executives, underwritten by BMO.
The latest CCI’s quarter-over-quarter index reading increased 5 points to +8, signaling that more organisations were accumulating cash reserves in the second quarter. The year-over year indicator decreased two points from +13 to +11.
A greater share of respondents anticipate that their organisations will accumulate cash throughout the summer; the forward-looking indicator measuring expectations for changes in cash holdings during the third quarter of 2019 increased two points from a reading of +10 to +12.
Additionally, in the second quarter of 2019, organisations’ cash behaviour aligned with their expectations entering the quarter. Meanwhile, the indicator for short-term investment aggressiveness decreased two points, moving from -1 to -3, signaling a continued conservative posture with cash and short-term investments.
These results are based on 168 responses from senior treasury and finance professionals this quarter.
“Despite strong employment numbers and a tight job market, business leaders continued their reluctance to deploy cash and short-term investments in the second quarter,” said Jim Kaitz, president and CEO of AFP. “The threats of a trade war with China, escalating immigration issues at the US border and a looming Brexit are contributing to the unease of treasury and finance professionals.”
“Even with so many unpredictable macro factors, the positive story is many companies are experiencing steady growth, have worked hard to become more efficient and manage expenses, and as a result are building liquidity,” said Kevin Kane, head of US Treasury and Payment Solutions at BMO. “Treasurers and CFOs need to remain diligent when it comes to managing their cash position, including finding the right balance between building reserves as a hedge against uncertainty and deploying funds to take advantage of strategic opportunities, while also factoring in changes to the yield curve.”
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