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Construction spending slides

Hard hit by weakening industrial spending on new plants and offices, U.S. spending on construction unexpectedly dipped by 0.7 percent in May as sales of both residential and non-residential building slowed down, the Commerce Department reported.

Construction spending on homes, schools, factories and offices dipped from a record level in April to a seasonally adjusted annual rate of $852.0 billion. Economists had been expecting a slight increase of 0.1 percent. At the same time, the April spending rate was revised downward to $858.2 billion, still at a record high level.

The biggest drop, the Commerce Department said, was in non-residential construction, which fell by 3.1 percent, to an annual rate of $173.0 billion, the slowest pace of non-residential building since June of 1997. Residential spending fell at a slower, but still substantial pace, of 0.8 percent, to an annual level of $413.2 billion.

Driven by persistently low mortgage rates — the 30-year, fixed-rate mortgage has fallen to almost 6.5 percent in recent weeks — home-building and buying have remained brisk.

But with business executives still running scared, impeding economic growth, business spending has been stuck in a trough since early 2000 when the economic slowdown began. In May, private industrial construction spending was at its lowest level since the first term of former president Ronald Reagan. Industrial construction spending dropped by 3.1 percent in May to a seasonally adjusted annual level of $17.0 billion, and is now down more than 41 percent from year-ago levels. The last time industrial construction spending was lower was in October, 1983, when the pace slumped to $15.6 billion.

More chief execs in the firing line

The accelerating pace of corporate scandals is taking its toll on the executive suite, and a total of 193 chief executives lost their job in the second quarter, a 9 percent increase from the 181 who quit or were shoved out during the first three months of the year, said Challenger, Gray & Christmas, an international outplacement firm that tracks job cuts nationwide on a monthly basis.

During June alone, 63 chief executives left their jobs, and a flood of departures, 44, was recorded in the first 11 business days of the month. Even so, May was a harder month on business skippers, when 80, a five-month high, fled or were forced out.

Significantly, Challenger noted, only 13 of June's 63 departures were planned retirements. In almost half of the departures, 30, no reason was supplied, "which only raises suspicion in the minds of investors," Challenger noted. Another 17, said Challenger, "resigned," or "stepped down."

So far in 2002, there have been 378 ceo departures, but that's still 32 percent lower than the 555 during the first six months of last year, when the number surged as the dot-com-technology bubble burst. At that time, said Challenger, "executives were being forced out by angry shareholders who had anticipated a non-stop upward trend."

Dollar General shores up financing

Dollar General Corp., a Goodlettsville, TN-based operator of almost 6,000 neighborhood stores, has completed a $450 million financing pact with a syndicate of lenders led by SunTrust Robinson Humphrey.

The proceeds will be used to refinance existing bank debt, including the maturing debt associated with leases that supported about 400 retail stores, two distribution centers and the company's headquarters.

The credit facility is split between a $300 million, three-year revolver and a $150 million, 364-day facility. Pricing is tied to a ratings-based grid. At the company's current ratings, the pricing is LIBOR plus 237.5 basis points.

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