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Business sentiment has improved but remains deeply pessimistic as inflation pressures show some signs of easing amid a softer economic outlook.
The Institute of Economic Research's March quarter business survey shows a net 61 percent of respondents think economic conditions will get worse in the coming year. That compares with a net 74 percent in the December survey.
Firms reported a slight lift in their own trading, but remained negative and cautious about the prospects for their profits and investments.
A net 10 percent of firms reported a fall in their trading in the past quarter, from 14 percent in the previous survey.
But there was a stronger improvement looking ahead, with a net 8 percent expecting a downturn in their own business in the coming quarter, down from 33 percent.
NZIER principal economist Christina Leung said the economic and commercial headwinds were stabilising.
"The survey indicates signs of capacity pressures are easing in the New Zealand economy as demand further weakened."
She said the survey pointed to the Reserve Bank's rate rises having a more marked impact on dampening demand.
The survey showed 63 percent of respondents faced increased costs and 69 percent expected future price rises, both lower than the previous quarter. But the number raising their prices, or expecting to, fell.
"Overall, we expect inflation to remain elevated for the remainder of 2023," Leung said.
However, there was a change in the businesses' major concern - slowing demand and sales now seen as the biggest challenge, replacing labour shortages and finding staff.
The building sector was the most pessimistic as rate rises increased costs and slowed demand, displacing retailers.
Leung expected the RBNZ to raise by 25 basis points to 5 percent in the next meeting, but then sit on the sidelines and assess data.