Business confidence has slumped to its lowest level since the pandemic hit as strong inflation, rising interest rates and labour shortages weigh on sentiment.
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The ANZ Bank's monthly survey of business confidence showed a net 63 percent of respondents expect the broader economy will deteriorate this year, a seven-point fall on May.
The more closely followed firms' view of their own prospects dropped four points, with a net 9 percent of firms expecting to be worse off.
ANZ chief economist Sharon Zollner said weakness was apparent in all its measures, particularly profits and investment amid intense cost pressures.
"Supply-side issues continue to dominate the list of firms' biggest problems, consistent with inflation pressures that are still intense," she said
"The main reason firms are so pessimistic on the outlook for profitability is not lack of demand, but rather supply-side constraints and cost pressures."
The relative bright spot were employment intentions, which eased but were still positive.
"Employment intentions are holding up pretty well, but with the profitability outlook so pessimistic, one does wonder for how long this can remain the case.
"Finding skilled labour remains the number one problem for firms, while non-wage cost inflation and high rates of pay continue to grow as problems."
Inflation expectations eased over the month, but the proportion of firms expecting to raise prices and those expecting increased costs lifted slightly.
However, wage pressures appeared to be building, which would add to the Reserve Bank's fears of a wage price spiral, exacerbating the overall inflation picture.
"The RBNZ is unlikely to conclude it can slow the pace of hikes any time soon," Zollner said, adding the central bank would be willing to risk a "hard landing" for the economy to get inflation back under control.