New Zealand business confidence slipped in the first quarter, with firms remaining fairly optimistic, consistent with moderating economic growth.

A net 23 percent of firms surveyed for the New Zealand Institute of Economic Research's quarterly survey of business opinion expect general business conditions to improve, down from a revised 24 percent three months earlier. On a seasonally adjusted basis, net optimists fell to 20 percent from 22 percent in the previous quarter and have fallen from 32 percent in the third quarter of 2013.

The survey's measure of experienced domestic trading, which it says closely mirrors growth in gross domestic product, fell to 19 percent from 22 percent in December.

"This is consistent with annual GDP growth moderating to just over 3 percent for the year to March 2015," said senior economist Christina Leung. "While the softening in activity indicators suggests a moderation in growth in the March 2015 quarter, annual growth is still expected to be respectable."

The survey paints a slightly softer view of business sentiment than the monthly ANZ Business Outlook, which rose to a seven-month high in March, helped by the return of rains after a dry summer that caused drought in the South Island and trimmed agricultural production. In its March 12 monetary policy statement, the Reserve Bank said the domestic economy remained strong, although the drought, fiscal consolidation, reduced dairy incomes and the high kiwi would weigh on growth.

The QSBO showed that capacity utilisation, a measure of the percentage of a firm's total production capacity that is actually being used, rose to 92.3 percent in the first quarter, the highest in seven years, from 92 percent three months earlier. Rising capacity utilisation is seen as a leading indicator of inflation, which the Reserve Bank expects to remain below the mid-point of its 1 percent-to-3 percent target band through March 2017.

As a result, the central bank has projected no increase in interest rates over its forecast horizon. Today's QSBO shows a net 4 percent of financial services firms expect domestic interest rates to fall over the next 12 months, a turnaround from the December result, when a net 17 percent expected an increase.