Economic activity remained lacklustre in the June quarter, according to the New Zealand Institute of Economic Research's quarterly survey of business opinion.
Firms became pessimistic but trading activity edged up on a seasonally adjusted basis, NZIER said.
This was consistent with annual economic growth of around 2 per cent, it said.
"The recovery remains lacklustre," NZIER's principal economist, Shamubeel Eaqub, said in a statement.
He said there was encouraging evidence of a rebound in Canterbury following the earthquakes but that the economic recovery had stagnated in the rest of the country.
Outside of Canterbury, the improvement in the labour market had stalled, which was consistent with modest employment and wage growth.
Eaqub said capacity pressures were emerging in Canterbury, mainly in the building sector, but elsewhere in country there was excess capacity.
NZIER said price increases are slow and for retailers, prices are falling.
"Even construction prices are falling outside of Canterbury," it said.
"Inflation is easing and medium term pressures are subdued."
Firms' profits remain under intense pressure from anaemic sales and "razor thin" margins.
As a result, business investment intentions are soft for this stage of the economic recovery.
NZIER expects the Reserve Bank to hold its official cash rate, which sits at 2.5 per cent, "for some time".
The NZIER's team of economists is one of the largest in New Zealand, outside of the government.
