The majority of respondents, 38.7%, said consumer demand posed the most limitation to expanding their businesses, the Otago Chamber of Commerce's latest quarterly survey to March found.
Businesses were almost evenly split over whether their situation will remain the same during the next six months, or deteriorate.
Chamber chief executive Dougal McGowan, noting the data was ''first impressions'', said while 38% expected a deterioration, those expecting it to stay the same rose from 32.7% in the previous quarter to 39.6%.
He said consumer demand in some sectors was ''fluctuating, quarter-to-quarter'', but with interest rates again under downward pressure, that was good news for households looking at buying big ticket items.
Otago and Dunedin retailers had benefited from a buoyant Christmas and returning students, up 5.7% for the quarter and well above the national data, but the effect of minimum wage increases this week was likely to affect data later.
''Expectations from respondents' own business situation has decreased even more, with only 26.9% saying it will improve, which is down from 38% from the previous quarter,'' he said.
Mr McGowan said spring and summer conditions had delivered a ''slight bounce'' to the economy, but that was waning in some sectors.
The results so far showed the primary sector ''remained positive'' he said.
''Lamb, logs and even wool have been up, but a lot depends on overseas demand,'' he said.
It was a positive for the export sector that talks were opened this week on updating the free trade agreement with China, when Prime Minister Jacinda Ardern visited.
He said while Otago tourism was slowing, it was still in growth and hoped rising domestic tourism would offset declines elsewhere.
''[However] staff costs are still the highest area of concern for most respondents,'' Mr McGowan said.
During the six months those believing staff costs had the biggest impact on profitability rose from 62.9% to 72.1%.
Wage increases for 37.7% of respondents went up 1.2% during the past year, but for 31%, they went up in a range 3%-5% for the year.
During the next 12 months, those expecting wage increases of 3%-5% jumped from 31% to 37%, he said.
Following wage rises, fuel costs had decreased as a factor hitting profitability, only 9.84% choosing this, as opposed to 25.93% last time, Mr McGowan said.
Businesses were still finding it difficult to get skilled or specialist staff and 41% found the situation more difficult than three months ago.
Numerous national surveys and forecasts during the past week have either shown declining or flat business and consumer confidence, the latest being Friday's ANZ-Roy Morgan consumer confidence index.
That index rose just one point to 122, which was around its historical average.
Regional household confidence in Otago and Southland took a plunge last week, unable to repeat earlier stellar results and the global economic outlook prompted the Reserve Bank to suggest the next official cash rate change would be downward.
ANZ chief economist Sharon Zollner said that overall, consumer confidence remained buoyed around its historical average, despite mounting global and domestic risks to the economy.
''Confidence has picked up from 2018 lows, but caution regarding the overall economic outlook appears to be preventing a break above average levels,'' Mrs Zollner said
