"Flat but resilient" is the picture of the economy emerging from the New Zealand Institute of Economic Research's latest Quarterly Survey of Business Opinion, its principal economist, Shamubeel Eaqub, says.
A net 2 per cent of firms reported a lift in their own activity over the past three months, down only fractionally from the June survey's 3 per cent but well below the long-run average of 11 per cent.
It was consistent with an annual growth rate in gross domestic product of 1.5 per cent, in line with the June quarter's, Eaqub said.
Confidence in the general business situation fell to a net 13 per cent optimism from a net 30 per cent in June.
But Eaqub cautioned that 85 per cent of the survey responses had come in before September 15, when the Reserve Bank held off on its planned interest rate increase citing concerns about the world economy, as well as last Friday's credit rating downgrades and the generally grim news flow from overseas.
"Firms' expectations may have changed since the survey," he said.
But Bank of New Zealand head of research Stephen Toplis said it was equally true that the survey was conducted before the New Zealand dollar plummeted to US75c, 13c below its peak.
"Surely this must be confidence-boosting to exporters."
Eaqub said there was nothing scary in the survey results.
"It is actually pretty flat. Canterbury is starting to rebound and inflation pressures are contained."
Labour market indicators were broadly unchanged, he said.
Employment improved slightly over the past three months, but it was driven by "pre-emptive" hiring in the construction sector in Canterbury, while the rest of the country was more subdued, and hiring intentions eased.
Firms reported some increase in the difficulty of finding skilled labour.
"It is consistent with some growth in wages, but nothing drastic, around 3 per cent," Eaqub said.
Investment intentions eased but remain above long-term averages, both for plant and machinery and for buildings.
The number of firms reporting they had raised their prices rose, while those reporting higher costs fell.
"This suggests margins may have been improving," Toplis said, "a supposition borne out by the fact that reported profits were the strongest since December 2006."
A net 18 per cent of firms reported increasing their selling prices.
That was was consistent with an inflation rate of around 2.5 per cent (excluding GST effects) over the next six months, Eaqub said.
Capacity utilisation by manufacturers and builders increased, driven by the latter.
A broader measure of spare capacity in the economy - the proportion of firms reporting capacity as a constraint on increasing output - also increased, but remains at a historically low level.
Much the largest constraint firms cited on increasing their output was a lack of demand.
"That is the biggest constraint on the recovery," Eaqub said.
Manufacturers reported a drop in output, following three quarters of improvement. It was driven by weaker domestic sales, though exports also declined.
Overall confidence among manufacturers remains positive however, in stark contrast to their Australian counterparts, where it has fallen sharply over the past six months.
"It would be unusual for New Zealand manufacturers to do well when the Australians aren't."
Builders reported improved profitability and new orders, even though output continued to decline over the past three months.
Prices charged turned positive for the first time in three years, which might indicate emerging price pressures from the Canterbury rebuilding, Eaqub said.
The services sector, the economy's largest, reported lower activity, especially among financial services. Employment remains subdued.
Retailers reported improved sales and very bullish expectations about the next six months - possibly boosted by the Rugby World Cup.