Big spenders halt rate cuts

THE country can kiss goodbye to the prospect of any further cut in the Bank of England's base rate next week. Strong consumer borrowing and spending are certain to outweigh concerns about the weakness of the world economy.

Following hard on the heels of the credit explosion in June, the CBI reports that retail sales surged in July as warm weather sent goods flying out of the shops. The CBI survey, which covers 20,000 outlets, points to the best retail outcome since April 2002.

Even the car market, in the doldrums for each of the past 12 months, shows some signs of revival, according to the CBI data.

Adding to the optimism, the latest consumer confidence measure shows that the public are feeling brighter than at any time since the end of last year.

All this is extremely worrying for the Bank of England. The hope had been that subdued household consumption would create room for greater public investment, as well as a manufacturing recovery.

Unfortunately, the economy looks as unbalanced as ever. Remarkably, so far the bust which inevitably follows such booms is at bay. New data shows that households are showing little sign of distress. Numbers of properties repossessed by mortgage lenders in the first half of the year fell. Arrears on payments are at their lowest in two decades.

This has to be attributed to the new era of low interest rates, which has taken the stress out of borrowing for millions of Britons.

A nation cannot live on credit for ever. Slow world growth will mean shrinkage in the wealth-creating sector of the economy and eventually the jobless rate will rise, putting stress on those who have over-borrowed. There also is the risk of a Japanese-style adjustment to asset values, which will see property prices decline.

Then people may suddenly realise that being over-borrowed is not a great idea at time when inflation is not eroding their debt.

Sir Peter's struggle
IF it were not so serious, one could almost feel sorry for Sir Peter Davis, chief executive of Sainsbury.

Davis has been determined that while he struggles to modernise the infrastructure, his grocery chain does not lose ground to rivals. This has meant tossing his hat into the ring in the battle for Safeway, in the hope that some of the stores break his way, and becoming a player should the much smaller Somerfield come to the marketplace.

But everything he seems to touch at present turns to dust. Tesco was able to swoop upon T&S Stores' 600-strong chain of corner shops last year with impunity. Sainsbury has 171 Somerfield shops in its sights, seeks a pre-clearance and finds itself facing a Competition Commission inquiry.

There have been big changes since the Tesco deal. The CC has acquired new powers and the full-scale inquiry into the all-out battle for Safeway, which involves every significant food retailer in Britain, means there is a whole new ball game. Still, Davis would be right to feel aggrieved.

As difficult for him will be new data from market research group TNS suggesting that Wal-Mart/Asda, which has been snapping at Sainsbury's heels for some time, has finally overhauled it to become Britain's second-largest supermarket chain.

Almost everything Davis has tried so far to put a skip in Sainsbury's step has backfired. After taking aim at the quality market, it retreated to offering better value. It linked with Boots in the belief that it could become a bigger player in beauty products, and that bombed.

Now it is seeking to challenge Tesco and Wal-Mart/Asda in the non-food market - having lost all first or even second-mover advantage. Maybe Davis would prefer to

be walking barefoot along the beach at the Pru. But perhaps not.

Gent's goodbye
SIR Chris Gent's farewell speech to Vodafone shareholders was suitably emotional and drew an unfamiliar standing ovation.

Gent, 55, has the good sense to leave while at the top, allowing someone else - in this case Arun Sarin - to take his place in the batting order.

Gent does not leave empty-handed, having accumulated a pension pot worth £10m. But he has at the same time been an important business creator, turning Vodafone into the world's dominant mobile operator. Not bad in an industry dotted with the entrails of enterprises such as WorldCom.

What next? Gent intends to try to make more of a political contribution by joining the free market think-tank Reform, where he can pursue his eclectic Tory and pro-euro agenda. That is a far more challenging exercise.