Global Cash Hoarding Increases

The world’s cash pile has doubled since the financial crisis roughly 10 years ago, according to a new Euler Hermes report. It is now 10% of the global gross domestic product (GDP).

Nonfinancial corporations had $7 trillion in cash on their balance sheets at the end of last year, according to Euler Hermes' Summer 2017 Economic Outlook, High Stakes Game Payment Behavior, Cash Piles and Major Insolvencies.

 “Global economic growth supports cash generation,” said the report. “Yet it is coupled with various uncertainties and risks which prompt saving behavior. Thus, companies will continue to be pushed to hoard.” The global cash pile increased nearly 3% in 2016 compared to the previous year based on more than 30,000 companies.

Asia-Pacific companies hold the most cash, while technology companies have surpassed oil and gas and automotive companies. Companies in the U.S. hold 30% of the global cash pile, and the U.S. has 71% of the tech industry’s cash pile. This is largely due to firms such as Alphabet (Google), Apple and Microsoft.

“Cash accumulation proved to be more dynamic in regions with the strongest economic growth,” according to Euler Hermes. “This explains why the total world cash shares of the Asia Pacific and North America regions have kept growing.” Asia-Pacific countries hold roughly 44% of the global cash accumulation. China has seen one of the largest cash pile increases since 2010, which represents more than 9% of the world’s cash.

Technology represents 18% of the global cash pile, followed by oil and gas, which is about half as prominent as the tech industry. The transportation, telecom, household equipment and machinery, and equipment sectors saw decreasing cash piles in 2016.

– Michael Miller, editorial associate

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