"The survey shows most indicators are going sideways, suggesting a gradual and patchy economic recovery," NZIER chief economist Shamubeel Eaqub said.
"The pace of recovery is modest and has not accelerated in the past nine months."
Trading activity of firms edged up to 0% from -3%, on a seasonally-adjusted basis. That was consistent with economic growth of around 1.8%.
Labour market conditions had stabilised, consistent with slow growth in jobs and wages, although labour shortages remained a concern in Canterbury.
The highly regarded quarterly survey of business opinion showed capacity pressures within the economy were largely concentrated in Canterbury and easing elsewhere.
That was consistent with contained consumer price inflation. Capacity utilisation of manufacturers was elevated, but for builders it had fallen to the lowest level since late 1991.
With so much spare capacity, it was unsurprising to see reduced investment intentions, particularly for plant and machinery.
That was in contrast with the high exchange rates, which made imports cheaper.
"At this stage of the economic cycle, we should be seeing a surge in business investment. The absence of this reflects a slow and gradual economic recovery," he said.
NZIER predicted the Reserve Bank would keep interest rates on hold as the survey showed a lacklustre economic recovery and modest inflation.
ASB chief economist Nick Tuffley latched on to a glimpse of good news contained within the survey to take a positive look at the future of the economy. He said the survey showed business confidence had improved since late last year. Such an increase was not altogether surprising considering the apparent progress made in dealing with the euro zone crisis earlier this year.
A rebound in confidence was foreshadowed by earlier surveys, he said.
Business confidence did soar to 23.6, compared to -2.7, in December, but many of the other indicators, including investment intentions, were still in negative territory.
Own activity rose to 23.7 from 15.1 in December but often, business owners believe their enterprise will outperform national benchmarks.
Mr Tuffley said while overall confidence had improved significantly, actual business conditions experienced remained relatively subdued.
That was consistent with a slow recovery, which he expected to continue.
ASB's growth forecast was 2% for 2012 and 3% for 2013.
The Reserve Bank would closely watch the Canterbury region, where capacity constraints were starting to emerge.
The survey
The QSBO is New Zealand's longest-running and most comprehensive business confidence survey. It samples manufacturers, builders, architects, wholesalers and retailers, and service sector firms regarding both their recent experience and their expectations for the next three to six months.
