Corporations outside of financial services -- from Cisco Systems Inc. to Coca-Cola Co. -- have collectively socked away more than half a trillion dollars in cash. They have also reduced short-term debt and cut inventories to near record-low levels in relation to sales, leaving them better prepared than in the past to weather a contraction.
Non-financial companies are well-positioned now because they kept firm control of spending during the expansion. That means ``there should be less of an imperative to reduce costs by cutting back on staff and capital spending,'' says John Lonski, chief economist at Moody's Investors Service in New York.
Manufacturers in particular have responded by keeping inventories in check, Achuthan says, removing about half of what he calls the ``recessionary impulse'' of steep cuts in stockpiles that occurred during past declines.
Companies were rewarded for their discipline with 20 consecutive quarters of double-digit profit growth that ended only in the middle of last year. As a result, industrial corporations in the Standard & Poor's 500 have amassed $615.5 billion in cash and cash equivalents, says Howard Silverblatt, senior index analyst at S&P in New York, compared with $352.4 billion in 2001 and $95.5 billion at the time of the 1990-91 recession.
The cash hoards mean companies aren't so dependent on battered banks for money to finance their operations. Debt as a percentage of net worth for non-financial companies outside of farming was 61.3 in the fourth quarter of last year, compared with 68 at the start of the 2001 recession and 93.6 in the 1990- 91 contraction, Fed figures show.
"Cash flows are more than adequate, and the amounts of monies that they need are very readily financed in the weakened credit markets,'' Greenspan said at the April 8 conference.