Businesses and consumers appear to be more realistic about their prospects although they are remaining relatively upbeat about their futures.
The BNZ monthly survey, released yesterday, found little change in expectations from four weeks ago for the economy in the coming year.
A net 1% of 565 respondents expected the economy would get worse compared with a net 2% expecting improvement in early July.
BNZ chief economist Tony Alexander said the result left sentiment above the net 17% pessimistic average reading since 2005 and in that sense suggested people could anticipate "reasonable" business capital spending and employment demand consistent with the economy growing near 3%.
"However, as with last month, the tone of the comments submitted by respondents is decidedly downbeat with a number indicating things appear worse than a few months ago.
"Customers are thin on the ground and cost pressures remain quite intense," he said.
At the same time, there were several respondents in the likes of the manufacturing and recruitment sectors noting improving conditions, but they were in the minority.
Interestingly, in spite of the Reserve Bank recently raising the official cash rate again, there were fewer expressions of concern about monetary policy than last month, Mr Alexander said.
An ASB survey, also released yesterday, showed that house price expectations continued to fall in the three months ended July while housing confidence remained steady.
ASB chief economist Nick Tuffley said housing confidence was unchanged during the quarter with a net 29% of respondents still saying they thought that now was a good time to buy a house.
That was tempered by a slide in perceptions around house prices.
"Expectations for further rises in house prices have fallen across the regions, with the decline particularly evident in Auckland," Mr Tuffley said.
"A net 19% of people we surveyed across New Zealand expected housing prices to increase, down from a net 35% last quarter," he said.
The survey showed growing awareness across the regions of future interest rate rises, which was likely to be tempering optimism.
Nearly 75% of respondents expected interest rates to rise.
The result was in line with recent data showing signs of a continued slow down in housing market activity, Mr Tuffley said.
House prices remained resilient even though potential sellers appeared to be holding off putting their houses on the market.
The median number of days taken to sell a house had continued to edge up and was now above the long-term average.
"We expect the outlook for the housing market will remain subdued given waning housing turnover.
"Beyond 2010, we forecast weak house price growth - tempered somewhat by population growth and net migration," Mr Tuffley said.
