(file image) Photo: RNZ / Rebekah Parsons-King
Business confidence jumped for the first time in six months as firms expect activity to improve from its lows and inflation to come down.
ANZ's monthly business outlook showed headline confidence up 21 points to a net 27 percent in July, while firms' activity outlook rose 4 points.
However, reported past activity fell further as firms continued to struggle in challenging economic conditions.
ANZ chief economist Sharon Zollner said the survey was a mixed bag, as forward-looking indicators picked up, but past activity showed most sectors were doing it tough.
"Most sectors continue to deteriorate, with construction and retail the weakest sectors by quite some margin. The economy-wide indicator is looking very soft," she said.
The improvement in forward-looking indicators had a "can't get any worse vibe to it".
"There is light at the end of the tunnel. Monetary conditions have started easing [and] mortgage rates are falling," Zollner said.
"The Reserve Bank [RBNZ] has basically acknowledged that they will be cutting interest rates sooner than they previously expected."
In a bit of positive news for the Reserve Bank, inflation expectations eased to 3.2 percent from 3.5 percent last month. However, pricing intentions picked up slightly, which Zollner put down to monthly fluctuations.
"Price and cost intentions took a breather after a solid fall last month. Overall, things continue to move in the right direction - not at a speed that suggests inflation will fall faster than the RBNZ expects, but rather suggesting the RBNZ can have more confidence in its forecasts of inflation returning sustainably to the target band."