Households pumped up checking accounts at a seasonally adjusted annual rate of $128 billion in the second quarter, and nonfinancial corporations added to time and savings accounts at a rate of $182 billion.
In keeping with the historical volatility in deposit flows (see charts), that is a reversal from the first quarter, when households drew down checking accounts and businesses took money out of time and savings deposits, and, overall,
But the activity was enough to keep households and businesses flush with cash. Deposits, shares in money market funds and currency accounted for 5.65% of total assets at nonfinancial corporations in the second quarter, according to data published by the Federal Reserve on Sept. 17 — down from a 50-year peak of 5.76% in the fourth quarter of last year, but still much higher than at any previous quarter in the period.
At households, cash accounted for 11.21% of assets, lower than recent peaks in late 2008 and early 2009, but about in line with levels that have prevailed since then — a range that remains significantly elevated compared with other points in the last 15 years. (From the mid-1980s through the end of the last decade, deposits' position on household balance sheets gave way to increasing representations of stocks and mutual funds.)
To be sure, the relative importance of cash has been heavily driven by the shellacking that overall balance sheets have taken during the past three years. At households, total assets fell by a fifth from the third quarter of 2007, to about $63 trillion in the first quarter of 2009, as the value of homes and stocks plummeted. Including a bit of backsliding in the second quarter this year, households recovered only about a quarter of that ground through June. (Stock markets did rally in the third quarter.)
Still, the pace at which nonfinancial corporations have added to their total deposits has been unusually strong for six consecutive quarters now, and signals that they are backing away from defensive positions remain faint.
[IMGCAP(1)]
