Comment: We are now reaching the high-water mark in the flow of profit  announcements from corporate America.

These numbers and statements provide an important signal for investors on the health of financial markets.

Are expectations being met? What do the numbers tell us about the situation on the ground? Is Main Street keeping up with Wall Street?

Firstly, in terms of the numbers, company profits for the second quarter of this year are up about 7 per cent on levels of a year ago.

This is ahead of expectations. Most analysts had pencilled in a growth rate of just over 5 per cent for this quarter.

However, as companies have been more cautious in their outlooks, beating estimates becomes something of a game and, while good to see, we shouldn't read too much into it.

What is encouraging, though, is the lack of any huge disasters that have characterised reporting seasons over the past two years. Equally it is reassuring to see a perceived improvement in the "quality" of announced profits.

Companies do not have to write off as much value as they did in 2002. The gap between reported and operating earnings (which is a measure of all the "bad stuff") is substantially smaller than 12 months ago. Standard and Poor's rating agency identified this as a positive feature earlier this year.

So where is the profit growth coming from? Is there any uplift in volumes or is it just costs being pared to the bone?

Well, really it's a bit of both, though tilted a bit more towards the cost-cutting side. Volumes are up in aggregate, which is helping margins. In fact, company revenues have been on the up since the third quarter of last year. The weaker dollar is also helping those companies with overseas exposure.

Companies also continue to keep a firm rein on costs. Lower headcount, more efficient working capital management and a tight hold on spending are hallmarks of many company statements.

Many of the leading indicators in the US in the past few weeks - including the Philadelphia Federal Index and the Institute of Supply Management survey - have pointed to the potential for a pick-up in business activity.

But what are companies themselves saying and, more importantly, how do they perceive the rest of the year?

Once again "challenging" is the hardest working word in chief executive statements for this second quarter. It is how IBM describes its current operating environment. Although its revenues are up, it is not coming from any increased computer sales; hardware volumes are down about 6 per cent on the previous year. Corporate customers are still delaying purchases.

This softness in corporate demand was also borne out by announcements from Lexmark, the printer and supplies company.

General Motors is also finding business conditions challenging. Most of its improvement in fortunes has come through its finance arm; in car sales it has lost some market share. However, it does see improving economic growth for the rest of the year.

The general tone coming out of chief executives' statements in this reporting season is of a grudging pick-up in demand. Coca-Cola has seen 3 per cent volume growth in its shipments in the US, and this is after hard work at relaunching existing brands and developing new ones. It has seen poorer numbers in the restaurant business but expects that to pick up from here.

Similar growth rates can be seen in Kraft's quarterly announcement. The maker of Maxwell House coffee and Philadelphia cream cheese was disappointed with volume growth of 2.5 per cent in the three months, citing too much stock in the distribution channel and global weakness.

Its response to this is to up marketing spend in the second half of the year, but it is still quite cautious, looking for volumes to be up by only 2 per cent for the year as a whole.

As always there are bright spots. Citigroup came in comfortably ahead of expectations and noted that corporate and consumer credit indicators remained encouraging - in fact, consumer delinquencies were improved on the first quarter.

There was also a very positive note from Colgate-Palmolive, which produced its 29th consecutive quarter of increased profits, boosted by a 9 per cent jump in volumes shipped in the US. Microsoft also posted double-digit earnings growth and is experiencing what it terms as "solid" consumer and corporate demand.

Another company seeing better times in the current quarter is Southwest Airlines, often cited as Ryanair's business model, which has taken bookings for July and August comfortably ahead of expectations.

The overall picture seems consistent with an economy growing in the 2-3 per cent band. Companies are quite realistic about near-term prospects, seeing the need to work hard to continue to punch in the numbers.

The profit picture for the first half of the year has been good. The policy-induced better economic growth that we are likely to see in the second half of the year should support a further boost to US company profits.

Eugene Kiernan is head of asset allocation at Irish Life Investment Managers