"Supply-side factors continue to cause headaches, including ever-higher costs, and, as we saw from the quarterly "biggest problems" question last month, a severe lack of labour."
She said the rate of growth in prices appeared to have stabilised, albeit at a high level, and there were perhaps signs that the Reserve Bank's relentless lifting of the official cash rate with the prospect of more to come were hitting a "pain threshold".
"New Zealand businesses are well aware that the Reserve Bank is on a mission to reduce customer demand for their wares in order to reduce inflation. No wonder they're feeling apprehensive."
Firms' employment intentions were still positive, but they remained downbeat about profits, investment, and convinced of more cost pressures to come and the likelihood they would have to raise their prices accordingly.
One of the big drops in the survey was in expectations for residential construction.
"The outlook for house-building has hit a brick wall in that there was a sharp fall in residential construction intentions. Note the fall in early 2020 was due to lockdown - it's difficult to imagine what would lead to such a rapid bounce this time," Zollner said.
Survey respondents reported wages rising 6.1 per cent in the past year while they expected a rise of 5.7 per cent in the year ahead, which would be a key factor in the strength of domestic inflation pressures.
"The RBNZ can take some comfort that there is at least no strong upward trend in expected wage growth," she said.
The Reserve Bank delivers its next monetary statement on 17 August, with expectations that it will raise the benchmark official cash rate by 50 basis points to 3 per cent.
