Shoppers fuel rate pressure

RETAILERS that blamed the weather for a poor summer have been caught out again. The Office of National Statistics confounded forecasters by revealing that August retail sales rose 0.6% from July, compared to fears of a 0.3% drop.

Sales are up a hefty 6.5% on last year, the sort of growth that most manufacturers can only dream of. Reports that the consumer boom is over are starting to look premature.

The rise has put paid to hopes that interest rates will stabilise. Sterling jumped more than half a US cent in anticipation of further rate increases. Economists now expect at least one more quarter-point rise before the end of the year - probably in November.

This is despite comments earlier this week by Bank of England MPC member Stephen Nickell that rates may be nearing their peak because the housing market is cooling. The National Association of Estate Agents said yesterday-that the average property price in the UK fell for the third month in a row to £222,932. Over three-quarters of estate agents, who are notorious for their optimism, believe house prices have reached a plateau.

The consumer does not seem to care at the moment. Shoppers are still spending, despite warnings about rising household debt.

Whingeing about the weather has become a favourite pastime for retailers. French Connection was the first to publicly blame wet weather for poor August sales. Others are grumbling behind the scenes. But their gloom has not been borne out by the figures.

In fact, the ONS said clothing and shoes saw the sharpest growth in August for more than a year. As High Street stalwart Next has shown, good clothes will always sell. Men may use the rain as an excuse to sit at home in front of the TV, but most women shoppers are made of sterner stuff.

High-kicking Corus

IT is good to see Corus getting back on its feet, not least because it provides most of the steel we use in Britain. Chief executive Philippe Varin has made strides to close the productivity gap between the Anglo-Dutch firm and its European rivals since taking the hot seat last May.

Half of the improvement in profits is courtesy of a 50% surge in steel prices. The rest, says Corus, is due to cost savings and restructuring.

Corus is now close to rejoining the Footsie, with a market value of £2.3bn compared to a low of £125m in the dark days of 2003. Russian shareholder Alisher Usmanov has made a profit of more than £100m on his stake. And dividends could resume in a couple of years, once debt levels ease.

By 2006, Varin expects to have wiped out the 6% margin gap between Corus and its competitors - improving underlying earnings by £680m. A slump in steel prices could derail the revival, though Corus believes there will be no sudden drop in Chinese demand, which is fuelling the rise.

Varin seems to know where he is going. He has been brutal in cutting jobs and demanding a sharper focus on the core steel operations. He had no qualms about pressing ahead with a rights issue last year, despite ruffling the feathers of second-largest shareholder Usmanov. He now needs to sort out customer service - only 76% of orders are delivered on time.

Simplifying the board structure could be an important catalyst for change. In addition to the UK Plc board, Corus has two boards in Holland. Last year, the Dutch supervisory board nearly pushed the group over the edge by vetoing the disposal of its aluminium operations. If Corus is to regain its place as a world leader, it is essential that strategic decisions can be taken swiftly and centrally.

The appointment of two new Dutch directors goes some way towards creating a more international Plc board. The Dutch are enormously sensitive about losing their power to London, so any changes must be approached with care. As Kingfisher has shown, fully integrating its French arm Castorama has done wonders for profitability.

With Corus, the situation is somewhat different, since it is the UK productivity that is lagging. That said, a single board is always best. The problems at Royal Dutch/Shell show what can happen when reporting lines are not clear.

Watts bites back

SIR Philip Watts clearly wants to put forward his side of the story after being slated for months over the Shell reserve scandal. His feisty attack on the FSA may cause a sharp intake of breath among regulatory officials, who are already braced for a lengthy legal battle with Legal & General.

But few will sympathise with Watts's view that his rights have been violated when he presided over an unprecedented era of ineptitude.