Cash Accumulation

“When uncertainty is rearing its head, you want to preserve cash,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Asset Management in Birmingham, Alabama. Among his wealthy clients who own businesses, he said, “it’s all about cost management and a reluctance to invest. They’re not laying people off, but when somebody quits they don’t replace them. That goes into building cash.”

Among 2,267 non-financial members of the Russell 3000 Index, corporate cash increased about 13 percent in the latest quarter from a year earlier, according to the data compiled by Bloomberg. The increase to a record $1.73 trillion was the most since a 16 percent gain in the second quarter of 2011.

As for capital expenditures, the most recent quarter’s year-over-year gain of about 3.1 percent was the smallest increase since March 2010. The spending declined 21 percent when compared with the final three months of 2012, marking the biggest quarter-to-quarter drop since the depth of the financial crisis in March 2009.

Buildup Resumes

For a while it looked as though companies were starting to slow the buildup in cash, beginning in 2011 as the U.S. economic recovery and job growth strengthened. The year-over-year gains fell below 10 percent for five straight quarters, to as low as 5 percent in the second quarter of 2012.

That changed in last year’s second half, with the U.S. presidential election under way and Congress struggling to reach a compromise on the federal debt as automatic budget cuts loomed. Most of the past year’s growth in cash occurred in the final six months of 2012. Cash rose about 3 percent in the most recent quarter from the end of 2012.

One other reason companies aren’t tapping cash is that they can easily borrow from lenders or go to the bond market when a need arises because Federal Reserve monetary policies are keeping interest rates at near-record lows.

“So long as borrowing costs remain low, it’s hard to see why companies would feel compelled to drive down their cash balances in any meaningful way,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York.

Apple Testimony