AFP 2Q cash indicators survey shows cash accumulating at an accelerating rate; sees cash growing further throughout summer.
US companies are hoarding cash again, as they anticipate more uncertain times ahead. That’s according to the results of the Association for Financial Professional’s Second-quarter Corporate Cash Indicators survey. Companies are also doing so at a faster pace, according to the AFP.
Moody’s says quarter-over-quarter cash readings have surged indicating a “significant softening in organizations’ business confidence,” AFP said. Much of that lack of confidence stems from Brexit, weakness in the US economy and “continued sluggishness in the global economy.” All of which gives less incentive to deploy cash.
And it looks like they will continue to pile up cash, AFP said. In the forward looking part of the survey, AFP said companies expect cash accumulation will continue “at an accelerated pace” through the rest of the summer. The forward-looking indicator, which measures expectation for changes in cash holdings, jumped from a reading of +7 to +16, the highest reading since July 2011 and the highest since AFP began measuring cash holdings in January 2011.
According to Moody’s Rating Agency, US non-financial companies rated by the firm held $1.68 trillion in cash at the end of 2015, up 1.8% from $1.65 trillion the year prior. “The top 50 holders of cash account for $1.14 trillion of the total cash pile, and entry to the top 50 list now requires $6.12 billion in cash,” Moody’s said. The usual cash-rich suspects here were the technology, healthcare/pharmaceuticals, consumer products, and energy sectors, all of which held a record $1.3 trillion at year-end, or 77% of total corporate cash. Moody’s noted that these four sectors “have accounted for more than 72% of the total every year since 2007.” Chart source: AFP Corporate Cash Indicators, 2Q 2016.