WASHINGTON — US companies are hoarding nearly one trillion dollars of
cash that they are unlikely to use for expansion amid a muddled outlook
on economic recovery, rating agency Moody's said Wednesday.
will hesitate to spend their cash hoards on expansion until there is
greater certainty about the direction of the US economy," said Steven
Oman, senior vice president at Moody's Investor Service.
Moody's study of corporate cash balances found that US companies,
excluding financial firms, had about 943 billion dollars of cash and
short-term investments on their balance sheets at mid-year 2010. The 20
most cash-rich companies had a combined 346 billion dollars.
By comparison, Moody's said, at the end of 2008, companies had 775 billion dollars of cash.
economy contracted 6.8 percent in the fourth quarter that year; the
worst recession since the Great Depression officially ended in June
The rating agency noted the companies' apprehension in the
face of the weak recovery which slowed to a 1.7 percent growth in
economic output in the second quarter of 2010 and has left persistently
"Given low demand and capacity utilization
within certain industries, companies are wary of investing their cash in
new capacity and adding workers, thereby doing little to abbreviate the
jobless recovery," it said.
Moody's forecast that as the economy
stabilizes, companies most likely would use their cash for share
repurchases and acquisitions.
The US Federal Reserve is widely
expected to announce next week it will resume major long-term asset
purchases, known as quantitative easing, to support the flagging