The outlook for economic growth has fallen back below trend, although the pace of current activity is still strong, a survey shows.

The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 2.6 per cent in October, below its long-term trend of 3.0 per cent.

This contrasted with the annualised growth rate of the Coincident Index – which indicates current activity – which was 3.5 per cent, above its long-term trend of 3.2 per cent.

The level of the index of economic activity rose 0.4 of a point (up 0.1 per cent) in October.

Westpac chief economist Bill Evans said the figures were consistent with the bank’s predictions of slightly below-trend growth in 2012.

“It appears that the boost to above trend growth that we saw in July and August has quickly faded,” he said. “The ‘around trend’ story which has been generally the case since the beginning of 2011 is now appropriate.”

Those surveyed were also expecting a two-speed economy of sorts, with strong corporate profits and productivity contributing to economic growth, while manufacturing prices and dwelling approvals would be a drag.

Mr Evans said the central bank had recognised the mixed nature of the Australian economy – as well as risks from Europe – in its decision to drop the cash rate at its December meeting.

The Reserve bank of Australia cut the cash rate by 25 basis points to 4.25 per cent, explaining its decision in the meeting minutes, released on Tuesday.

“With prospects for Europe steadily deteriorating and the interest rate sensitive parts of the economy remaining weak, we believe there is ample scope for a further rate cut in February,” Mr Evans said.