Business confidence has dropped to its lowest level since March 2011, the latest New Zealand Institute of Economic Research's quarterly business opinion survey shows.
But the fall is in stark contrast to firms' own trading activity.
While a net 9% of businesses expected deterioration in the economy over the coming months, 12% reported an improvement in their own trading activity over the past quarter.
Even more positive is the rebound in businesses' expected trading activity over the next quarter, with 17% of businesses expecting an improvement.
Recent dominance of negative news about the New Zealand economy had left many businesses feeling uneasy about general business conditions but few had seen a direct effect of demand in their own business.
Businesses were still looking to hire and invest in plant and machinery, NZIER senior economist Christina Leung said.
South Island firms were reported to be the most pessimistic and, while not directly surveying the agricultural sector, weaker confidence in dairy-intensive regions like Waikato, Taranaki and Canterbury was also evident.
ASB senior economist Jane Turner said it was a mixed result for the Reserve Bank.
The fall in confidence might not be enough to concern it, given it had already cut the cash rate 75 basis points since June, which should help provide some support, but the inflation measures were cause for concern.
Inflation indicators remained very subdued, with net selling prices declining in the third quarter, the weakest result since 1999.
The bank expected one more Official Cash Rate cut from the Reserve Bank and, while it slightly favoured this month over waiting until December, it would ''remain a close call'', she said.
Westpac senior economist Satish Ranchhod said the key question was whether activity would continue to hold up, moving into 2016.
The economy was facing a challenging combination of conditions.
On the down side, the global economy remained rocky, the Canterbury rebuild levelled off and there was the looming risk of drought.
On the upside, there was continued strength in the housing and construction sectors, ongoing strength in migration, and a lower New Zealand dollar.
On balance, some softening in GDP growth was expected over the coming year, but that was likely to be a slowdown, not a crash, he said.
