Business confidence remains pessimistic but is continuing to improve led by a positive outlook for the construction sector.
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The Institute of Economic Research's quarterly survey of business opinion shows a seasonally adjusted net 16 percent of firms expect conditions to get worse over the near term, against 38 percent in the previous survey.
That was a big improvement on the March quarter when a net 68 percent expected economic conditions to deteriorate.
Demand was holding up with with a net 1 percent of firms reporting a drop in trading activity.
NZIER principal economist Christina Leung said that indicated annual economic growth of about 2 percent by late 2020, from the lockdown lows earlier in the year.
She said much of the growth was driven by the construction sector.
"With the pipeline of residential, non-residential and government construction work increasing, building sector firms are hiring to keep up with demand."
Leung said labour market constraints continued to be a drag on the economic outlook.
"This is particularly the case for skilled labour, with a net 43 percent reporting difficulty in finding skilled labour - close to levels seen in early 2020."
