KEY POINTS:
Beset by rising interest rates, higher petrol prices and a sky-high dollar, businesses' confidence has plunged in the New Zealand Institute of Economic Research's June quarter survey.
But companies are more optimistic about their own prospects than about the economy as a whole.
And the survey's indicators of inflation pressure show either little or no movement in the direction the Reserve Bank needs to see.
A net 37 per cent of businesses expect the general business situation to worsen over the next six months compared with a net 15 per cent pessimistic in the March survey.
It is the weakest "headline" confidence has been for a year.
However, a net 9 per cent expect their own trading activity to increase over the next three months.
That is down from a net 16 per cent in March but, when adjusted for normal seasonal effects, the decline is more modest - from a net 17 per cent then to 13 per cent now.
It has averaged 14 per cent during the past 10 years.
Firms' hiring intentions were little changed from the previous survey and well above their average level during the past decade.
But the planned jobs growth is confined to the services and building sectors; retailers and manufacturers expect to be reducing employ-ment.
Plans to invest in plant and machinery have softened during the past six months but remain above the long-term trend.
Economists said such numbers suggested a slowdown in economic growth from the heady pace of the March quarter, but not a dramatic one.
"The activity indicators suggest economic growth has slowed but by nowhere near enough to reduce the upward forces on medium-term inflation" said Doug Steel of Westpac.
The proportion of firms finding it harder to get skilled workers remains high compared with the average of the past 10 years, and recruiting even unskilled people is becoming increasingly difficult.
Another key indicator of how much, or rather how little, spare capacity there is on the supply side of economy is a question in the survey directed at manufacturers and builders about how much they could increase production without having to raise prices.
Institute economist Alice Wong said that "capacity utilisation" measure eased slightly but, when seasonally adjusted, was close to its average for the past five years.
The survey records a squeeze on profits, as the proportion of firms reporting and expecting higher costs outstripped the proportion expecting to raise their own prices.
A net 35 per cent intend to raise prices, down from 40 per cent in March but well above the 18 per cent average during the past 10 years.
Overall, economists judge the survey as one which would keep the Reserve Bank feeling uneasy about the inflation outlook but would not spook it into a fourth successive official cash rate increase on July 26.
EBBING AWAY
* General business confidence has plunged to a net 37 per cent pessimistic from a net 15 per cent three months ago.
* But a net 9 per cent of firms expect their own activity to increase.
* Hiring and investment intentions have weakened, though they remain positive.
* Workers (skilled and unskilled) are getting harder to find.
