Katie Bradford's Business Watch: PREFU, retail spending and food prices

Business Correspondent Katie Bradford sets the scene for the week ahead in the economy.

The Pre-Election Fiscal Update is out Tuesday. We know it'll be bad. The question is how bad and how much the usually unflappable Grant Robertson will squirm and spin.

It'll reveal Treasury's forecasts for inflation, unemployment, government debt and operating balance, and economic growth for the next couple of years.

The Finance Minister will be hoping this doesn't signal the final nail in his coffin for the coveted role. He will be looking for any nuggets of gold that can be positively spun and provide some glint in voters' eyes. There are lots of tricky obstacles in his way. A disappointingly low tax take — $2 billion lighter than expected in May's budget — means everyone already knows the books are in a bad shape. But economists now predict a deficit that could be up to $5 billion worse than forecast.

While it's Labour that will hurt the most, it does make expensive promises that will be much more difficult for all political parties. Their costings are based on what they know. They are all walking on a razor-thin tightrope between cutting spending, introducing new taxes and tempting promises. Any more bad news and the rest of the election campaign will be all photo ops and no policy treats.

Just how firmly are cards remaining in people's wallets? Electronic card data from Stats NZ is also out on Tuesday. The past few months spending has remained stable, or with minimal movement, but that's largely due to increased prices for goods. High interest rates and the general cost of living crisis are rapidly slowing down consumer spending. That's despite a surge in migration and tourists, meaning it's Kiwis keeping their wallets closed. Nearly half of all mortgages will be refixed in the next few months, which will only dampen spending further. That'll make the Reserve Bank happy and if it continues, keep those interest rates stable that little bit longer.

Food (and rent) prices are out Wednesday. Speaking of inflation… the next Consumer Price Index (our main measure of inflation) isn't out until three days after the election, so these monthly figures are the best indicator we have of how inflation is tracking.

Food prices fell 0.5% in July, month on month. That's still a 9.6% on 2022, but that minimal decrease was a glimmer of light in a dark cost of living crisis.

Migration figures are also out on Tuesday. One of the most important drivers in the economy right now is migration. Those extra arrivals are good for employers desperately looking for workers and businesses looking for new customers. Queenstown is booming once again and migration is playing a big part in that. Net migration was 86,800 year-on-year in June. Arrivals were up 219% — for obvious reasons. Visitor arrival numbers are also out, which gives us an idea of how well tourism is going. All signs are tourism is in a positive state, and alongside hospitality, slowly returning to pre-Covid levels. Political parties will also be keeping a close eye on these numbers as they consider immigration settings.

China. Keep watching. If the Chinese economy continues to deteriorate, all forecasts are out the window.