The foundation work at The Pacifica apartments in central Auckland. A shortage of skilled workers has caused building costs to spiral, leading to a slowdown in the construction sector.

New Zealand's economy could be entering a "danger zone", economists warn, where a weak start to the year feeds falling business confidence, which could see the economy lose momentum throughout 2018.

On Thursday Statistics New Zealand will release economic growth figures for the first three months of 2018, which are expected to show the economy expanded by around 0.5 per cent. Three of the New Zealand's four major banks are tipping growth of 0.4 per cent.

If the figures turn out to be correct, annual growth would have slowed to around 2.6 per cent, the slowest rate of annual expansion since 2014.

While the pace of the economy is likely to have bounced back in the current quarter, which ends on June 30, economists are increasingly warning of a loss of momentum.

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"We have been warning for some time of the likelihood of a soft patch in growth over the first half of this year, as uncertainty around the new Government's policies weighs on firms' expansion plans and households' willingness to spend," Westpac senior economist Michael Gordon said.

"A lift in government spending will help to support growth, but this is more of a prospect for next year's growth rate."

Westpac expects Thursday's figures will show the economy expanded by 0.4 per cent, well below the 0.7 per cent predicted by the Treasury and the Reserve Bank.

Weaker than expected growth "would put some pressure on the Government's revenue and spending projections, and would reinforce the message that official cash rate hikes are quite a way off," Gordon said.

A 'self-fulfilling prophecy'?

Since September, the month of the general election, headline business confidence has fallen sharply. While the "own activity" measure - which asks individual businesses how they are performing - held up initially, the figure has been drifting steadily lower in the early part of 2018.

Ultimately, lower business confidence would tend to see businesses invest less and be more reluctant to take on new staff.

ASB senior economist Jane Turner said, so far, there were few indications that lower business confidence was having any impact in actual activity, with investment indicators so far remaining strong. However, she warned that investment tended to lag confidence, meaning the impact of weaker sentiment was still to come.

"These [investment] decisions have been in the pipeline, potentially since before the election, so what we would expect to see going forward is an impact on investment because of lower confidence, that's where our concern lies," Turner said, describing the situation as a "danger zone".

ASB said there was a risk that corporate New Zealand could enter a weak period even though many drivers of the economy, such as low interest rates and strong migration, remained positive.

"Confidence is low, but our fundamentals are actually quite strong, so there is a risk that businesses talk themselves into weaker growth, because it becomes a self-fulfilling prophecy. When they invest less, and employ less and demand falls."

ANZ said economic growth had expanded at an average of 0.9 per cent per quarter since 2014, but this was unlikely to continue.

"The underlying pace of growth is already slowing, ANZ senior economist Liz Kendall said, adding that "downside risks" had increased.

"Construction and net immigration – key drivers of recent growth – are expected to have topped out, and we believe consumption growth will cool in the face of a softer housing market."

Kendall said businesses were facing credit and capacity constraints as well as "policy uncertainty" which was already hitting activity, which based on recent data was "looking fairly lacklustre".

However ANZ said the cycle growth was not expected to "completely roll-over", with few signs of major imbalances which have tended to precede previous downturns.

"Supported by strong income growth (in large part a result of elevated export prices) and fiscal expansion, our base case is that the economy will grow around trend (or thereabouts) over the next couple of years."