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US firms continue to accumulate cash in 3Q15, though at a slower pace

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US firms continue to accumulate cash in 3Q15, though at a slower pace

Study indicates finance professionals are still cautious about deploying cash reserves.

American businesses remained cautious deploying cash in 3Q15, but aren't building their holdings as much as they indicated they would last quarter, according to the October 2015 results of the AFP Corporate Cash Indicators, a quarterly snapshot of financial management in the US. 

In addition, the CCI measures for short-term investment aggressiveness showed a more conservative investment posture for the first time in more than three years, decreasing from a neutral reading of 0 to -2 during the third quarter.

Corporations are reluctant to make large investments and will continue to accumulate cash."

"The almost unchanged corporate cash accumulation sentiment shown in this quarter's survey may be a reflection of the prevailing economic uncertainty and volatility that US corporates are experiencing," saidPatrick Moore, Executive Vice President and head of Capital One Bank's Treasury Management's Product Management & Innovation group. "With a rate hike on the horizon and the consequent expected drag on the US economy, corporations are reluctant to make large investments and will continue to accumulate cash."

For the third quarter of 2015, the indicator measuring the quarterly change in cash holdings was +6. While this indicates that companies were still accumulating cash, it also shows a significant decrease from the July reading of +18. Meanwhile, the year-over-year indicator stayed the same at +13.  The forward-looking CCI measure tracking expectations for changes in cash holdings during the current quarter came in at +8, a decrease of 3 points from what was reported in July's CCI report and up 11 points from a year earlier. While every measure shows the continued accumulation of cash, these indicators do suggest that organizations will stockpile less new cash than they did during the prior three months. 

"Treasury and finance professionals remain reluctant to deploy their organizations' cash balances due to global economic uncertainty and uncertainty over the timing of a U.S. interest-rate hike," said AFP President and Chief Executive Officer Jim Kaitz.

 

 

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