Business confidence picked up slightly in the National Bank's latest monthly survey, albeit to levels that are weak by the standards of the past three years.
Thirty per cent of respondents expect general business conditions to improve over the year ahead, while 15 per cent expect them to get worse.
The resulting net 15 per cent positive is up from a net 13 per cent in the June survey, but still the second-weakest reading this year and down from a net 38 per cent peak in April.
Firms' expectations for their own activity - which they are more authoritative about - crept up to a net 24 per cent positive from a net 21 per cent in June, but that is still well down from a net 39 per cent in March.
"Employment and investment intentions nudged higher," said the bank's chief economist, Cameron Bagrie. "However, somewhat perplexingly, these positive expectations are being formulated at a time when profit expectations are being pared back."
Only a net 1 per cent expect higher profits over the coming year, down from a net 5 per cent in June.
That is despite a slight pick-up in pricing intentions, a net 17 per cent of firms expecting to raise their prices, up from a net 15 per cent in the June survey. Such levels for this indicator are, nonetheless, soft by the standards of the past three years.
Firms expecting to lift exports over the next year have fallen to a net 9 per cent from a net 13 per cent in June.
It was the lowest level of exporter confidence since May 2009, Bagrie said, reflecting a global economy losing momentum while the New Zealand dollar remained high relative to local fundamentals.
The construction sector recorded the biggest deterioration in overall sentiment, expectations of their own activity, profits and employment.
"Some of the declines are from elevated levels, but they don't augur well for the construction sector filling the economy's potential growth void in late 2012 and early 2013," Bagrie said.
The bank's composite growth indicator, drawn from responses to the National Bank business survey and the ANZ Roy Morgan consumer confidence survey, was flagging growth of 2.2 per cent by the end of the year, he said.
"The economy seems stuck in second gear."
The negatives are European malaise and a stretched national balance sheet that demands "economic penance", while the positives are the once-in-a-generation opportunity of connectivity with Asia and the rebuild of Christchurch - "bigger than Ben Hur, though the timing remains uncertain".
STUCK IN LOW
* Net 15 per cent expect general business conditions to improve over the year ahead.
* Net 9 per cent expect to lift exports.
* Net 1 per cent expect higher profits.