Business and consumer surveys this week are reflecting an economy in the doldrums with shallower-than-expected recovery and underwhelming consumer confidence.
With gross domestic product quarterly data due out later this week, the New Zealand Institute of Economic Research consensus of forecasts and the separate Westpac McDermott Miller consumer confidence index released yesterday were flat.
New Zealand's economic recovery "will be shallower than previously thought", according to the forecasts' consensus, but still growing and accelerating from 1.8%, for the year to March, to 3.2% growth by 2014, NZIER said yesterday in a statement.
"Despite the long recession, internal and external imbalances remain. Forecasters expect the fiscal position to remain in deficit over the next three years.
"The current account deficit is set to worsen, reversing recent improvements," NZIER said.
The NZIER data is a survey of 11 forecasts made by financial and economic agencies, including major banks, Treasury and the Reserve Bank.
The current account deficit would deteriorate again, from $9 billion in 2012 to $13.2 billion by 2014, NZIER said.
"A widening current account deficit reflects insufficient domestic savings to fund investment, which must be met by foreign borrowing," NZIER said.
The more "moderate recovery path" for the economy reflected repeated delays in the rebuilding in Canterbury, and investment generally.
However, the forecasters were more optimistic about the global economy and exports, reflecting "slightly less concern" about the fiscal situation in Europe, NZIER said.
Westpac senior economist Felix Delbruck said while recent spending indicators had been positive, households remained "downbeat" about their financial situation and near-term economic outlook.
"Consumer confidence barely rose from three months ago," Mr Delbruck said in a statement yesterday.
The consumer index was "virtually unchanged", rising just 1.1, from 101.3 for the quarter to December to 102.4 for the quarter to March, meaning confidence remained weaker than any time since early 2009 (aside from post-earthquake surveys in March last year).
"[Households] show little appetite for spending on big-ticket items," Mr Delbruck said.
While there had been some improvement in business confidence earlier this year, households had been confronted with a "mixed bag of news" during the quarter, including few signs of employment improving, petrol price hikes and "hefty" rates rises, he said.
There had positive trends in electronic card transactions and a "warming" in the housing market meaning household consumption might have been gathering some momentum.
"[However] today's survey is painting quite a different picture.
Indeed, based on historical patterns, households' continuing weak assessment of their finances and lack of enthusiasm about spending on big-ticket items point to very weak consumption growth in early 2012," he said.
"Consumer caution" is likely to be a watchword for the time being, he said.
NZIER said a slow recovery and elevated foreign exchange rate, continuing to work against exporters, would restrain inflation during the next two years.
"As a result, the Reserve Bank will raise interest rates later and more gradually," it said.
