corporate cash

Corporate treasurers are set to spend their cash this quarter, buoyed by expectations of further U.S. economic growth, according to the Association for Financial Professionals’ Corporate Cash Indicators released Monday.

The indicator that measures expectations in the change of cash holdings by AFP member finance executives is at -14, compared to -3 in the previous quarter and -1 a year ago. This marks the lowest reading of anticipated future cash (put another way, the strongest reading of a future decline in cash holdings) since AFP began tracking the indicators 17 quarters ago.

The indicators measure recent and anticipated changes in corporate cash balances by calculating increase percentage minus decrease percentage.

“Managing liquidity in this low-rate environment is an ongoing strategic challenge for our corporate clients, but the outlook for cash and short-term holdings reflects renewed confidence in the economy.” said Pasquale Nuzzo, senior vice president for Capital One Bank’s treasury management group, underwriter for the indicators. “We expect the growth in liquid holdings to continue throughout the first quarter, though at a slower pace.”

As expected, corporate treasurers increasingly accumulated cash in the fourth quarter, with the indicator measuring the quarterly change in cash holdings at +13. However, treasurers accumulated significantly more cash in the fourth quarter of 2013, with that indicator at +20 a year ago.

The indicator for short-term investment aggressiveness rose from zero to +5, indicating that companies are seeking greater yield from their cash holdings.

“Despite recent scares in Europe and Asia, U.S. businesses will spend cash this quarter,” Jim Kaitz, AFP’s president and chief executive said in the press release. “Their growing confidence is also reflected in a new quest for yield.”

Companies are deploying their cash in a number of ways, including increasing capital expenditures, merger and acquisition activity, and hiring, AFP said.

Featured image: Thinkstock

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