"Yes the economy is decelerating but it is far from a full-blown downturn," Bagrie said. "It's more akin to moderation to a below-trend rate."
The survey's readings for domestic trading activity, experienced over the past three months and expected for the next three, were weaker, along with hiring and hiring intentions, investment and investment intentions, and profitability.
Firms' pricing power remains under pressure. Only a net 1 per cent reported they had raised their selling prices in the past three months, while a net 17 per cent reported higher costs, exacerbating the margin squeeze evident in the previous two surveys.
Retailers were especially grim, with a net 7 per cent reporting weaker sales, compared with a net 21 per cent reporting higher sales in the March quarter. Expectations for the next three months are also in negative territory.
By contrast, among manufacturers a net 24 per cent expect exports to improve, perhaps reflecting a more favourable exchange rate with Australia. They reported less spare capacity but a decline in investment intentions, albeit to levels above their long-run average.
Economy-wide firms reported it had become a bit less difficult to find the skilled labour they need. Reported skill shortages remain below the levels recorded during the mid-2000s boom.
Bank of New Zealand economist Craig Ebert said while employment intentions eased further in the June quarter, they remained consistent with relatively solid growth in jobs over the coming months.
"It's a slowdown, but much as we expect, and from rates of employment growth last year that were clearly unsustainable."
Deutsche Bank chief economist Darren Gibbs said the survey added to evidence suggesting the conditions required for stronger domestic inflation - in particular, above-trend economic growth - were no longer in place.
"We think that this leaves the Reserve Bank on track to ease the official cash rate further over coming meetings, with a lower exchange rate required to lift inflation towards target levels," Gibbs said.
ASB economist Jane Turner also expects weakness in business confidence and inflation pressures to prompt further interest rate cuts.
"Recent declines in the New Zealand dollar and lower interest rates should provide support to growth over 2016," she said.
Bagrie said the combination of growth slowing and inflation pressures remaining benign was consistent with additional easing from the Reserve Bank.
"We continue to see the bank returning the OCR to 2.5 per cent [from 3.25 per cent now] with a further cut later this month as well as cuts in September and March."
Leung agrees about the need for another two rate cuts but is not sure about a third.
Slipping back
• Net 18% in Auckland expect general business conditions to improve, down from net 27%.
• Net 5% positive nationally, down from net 23%.
• Net 1% have raised selling prices in the past three months.
• Net 17% have reported higher costs.
