A measure of economic growth in the coming months has strengthened because of growing company profits and gains on the share market.

The Westpac Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future, was 5.4 per cent in April, well above its long-term trend of 3.0 per cent.

The two major reasons for the above-trend reading were a turnaround in real corporate profits and the share market’s rally in the first few months of 2013, Westpac and the Melbourne Institute said on Wednesday.

But profits and the share market have since fallen, meaning the encouraging reading on future economic growth is likely not to last, Westpac senior economist Matthew Hassan said.

“We remain concerned that this above-trend pace will not be sustained over the course of 2013,” he said on Wednesday.

Domestic demand is currently weak, and the case for further cuts to interest rates in the coming months remains strong, Mr Hassan said.

“With the prospect of a more pronounced drag from the mining downturn still to come, there is already a convincing case for additional policy support for demand,” he said.

Mr Hassan said he expects the Reserve Bank of Australia to cut the cash rate by a quarter of a percentage point in August, and to cut again, by the same amount, by March 2014.