The expected recovery of the US economy is drawing closer as many of the country's biggest companies have recently reported earnings estimates that exceeded forecasts. Steve Matthews reports on how a weak dollar, cost cutting, low interest rates and rising consumer spending are pointing to a bright second half.

　　A growing number of US companies, led by Coca-Cola Co, General Motors Corp and Citigroup Inc, are exceeding earnings estimates, helped by cost cuts, rising consumer spending and a lower dollar.

　　Of the 172 Standard & Poor's 500 companies reporting second-quarter earnings as of last Monday, about two-thirds topped forecasts, the most since 2000's first quarter. Profits are expected to rise 6.9 percent in the quarter, revised from 5.2 percent in early July, according to Thomson Financial.

　　The earnings gains are giving investors confidence in economic and earnings recovery in the second half of the year. Rising consumer confidence, US billion in tax cuts, Federal Reserve interest-rate reductions and a falling dollar will contribute to accelerating growth, they said.

　　"The economy is getting stronger," said Robert Benson with Banc of America Capital Management. "We are seeing some strength in manufacturing. Consumer spending is still holding up well. We also have a weaker dollar and could see some benefit from that."

　　Stock prices reflect an expected recovery, investors said. The S&P 500 has risen 11 percent this year after falling 23 percent last year. The Dow Jones Industrial Average has gained 9.3 percent, while the Nasdaq Composite Index has jumped 30 percent. The gains for US stocks in the second quarter were the biggest in four and a half years.

　　Not all results have exceeded forecasts. Microsoft Corp and Merck & Co missed earnings estimates, while International Business Machines Corp's sales were less than some investors anticipated and the company said that customers are reluctant to place big orders.

　　Profits among S&P 500 companies are forecast to rise 13 percent in the third quarter and 21 percent in the fourth quarter, according to Thomson Financial. The projections don't always compare net income, and estimates may exclude some costs.

　　"The news is generally good," said Peter Sorrentino, who helps manage US.3 billion for Bartlett & Co. "The one shortfall of the reporting season is revenue growth. It is still a cost cutting and efficiency story. A lot of the revenue growth has been due to currency translation with the softer dollar."

　　Coca-Cola, the world's largest soft-drink maker, said second-quarter profit rose 11 percent. Results were aided by currency translation for the first time in seven years, Gary Fayard, chief financial officer, said on a conference call. Excluding costs for job reductions, earnings were 3 US cents a share more than the 54 US cent average forecast of analysts.

　　Caterpillar Inc, the world's largest maker of earthmoving equipment, said earnings doubled because of higher sales and currency-related gains.

　　Net income rose to US million, or US.15 a share, exceeding the 66 US cent average forecast. Almost half of Caterpillar's revenue came from overseas.

　　"Caterpillar is kind of a canary in the mineshaft for multinational companies," Benson said. "Caterpillar beat expectations dramatically. There are greater orders and greater shipments based on the weaker dollar."

　　3M Co, the maker of Scotch tape and medical inhalers, said earnings increased 33 percent because of lower costs and higher inter-national sales. Net income last quarter rose to US million, or US.56 a share, more than an expected US.51.

　　The euro has increased 12 percent in value versus the US dollar in the past year, while the Canadian dollar has risen about 10 percent. The fall in the value of the dollar has made US goods and services less expensive, boosting profits for exporters and increasing the value of the earnings US companies repatriate from foreign subsidiaries.

　　Citigroup, the world's biggest financial company, said earnings rose 5 percent as credit-card and mortgage lending drove revenue to a record. Net income rose to US.3 billion, or 83 US cents a share, beating the 80 US cent forecast of analysts.

　　Financial-services companies had some of the biggest gains among the 10 industry groups in the S&P 500, with an average profit increase of 18 percent, according to Bloomberg data.

　　A rise in US unemployment to a nine-year high last month has curbed the growth in consumer spending, though not as much as expected.

　　General Motors Corp, the world's largest automaker, said net income fell 30 percent to US million, or US.58 a share, exceeding the average analyst estimate of US.19. Sales were unchanged at US.3 billion.

　　"As we look at demand here in the US market, so far this year it's been a little above expectations," said General Motors Chief Financial Officer John Devine. "June was pretty good. July looks pretty good. It's giving us some optimism that the rest of the year will not be terrific but better than say the first quarter."

　　Business spending remains sluggish, which may hamper the rate of recovery of earnings of computer-related companies, analysts said.

　　"There is not a strong confirmation that the economy and earnings will be better in the second half," said Chuck Hill, research director for Thomson Financial. "The technology area is the most vulnerable" to earnings estimate cuts by analysts. "We should be hearing better comments from the companies."

　　Microsoft, the world's largest software maker, said profit rose 26 percent as sales of business programs and Internet advertising increased. Excluding some legal costs, fourth-quarter profit missed analysts' estimates by 1 US cent a share.

　　Profit at IBM rose to US.7 billion, or 97 US cents a share, from US million, or 3 US cents, a year earlier. While that matched estimates, excluding certain costs, revenue rose 23 percent in services and 6.2 percent in software, less than some investors had forecast, and computer-hardware sales dropped 0.9 percent.

　　Companies continue to delay major software purchases, IBM Chief Financial Officer John Joyce said on a conference call. "It's a tough market out there."

　　Merck, the second-biggest US drugmaker, said profit climbed 6.6 percent to US.87 billion, or 83 US cents a share, less than the average analyst estimate of 84 US cents. Growth for Merck's Zocor cholesterol treatment is slowing as it competes with Pfizer Inc's Lipitor, the world's best-selling medication.