updated 7/30/2004 11:55:50 AM ET 2004-07-30T15:55:50

Consumers' overall attitudes on the economy improved in July, largely due to a rise in optimism over the outlook, according to a report released Friday.

Major Market Indices

The University of Michigan's consumer sentiment index increased to 96.7 from 95.6 reported in June, according to those who have seen the subscriber-only report. The preliminary July tally had originally been reported at 96.0 several weeks ago.

The final July reading compared favorably with the 96.0 level expected by economists in a survey conducted by Dow Jones Newswires.

Those who saw the Michigan report said its current conditions index stood at 105.2 in July, versus 104.6 in the preliminary look and 106.7 in June. Meanwhile, the expectations index, with attempts to describe consumers' views about the longer-term horizon, was revised to 91.2, from the 90.4 in the first look at July, and 88.5 in June.

The Michigan report is based on a telephone-based survey of about 500 households. The report comes on the heels of the New York-based Conference Board's far broader poll on confidence during July, released earlier this week, which moved to a two-year high on optimism about the state of the job market.

The confidence reports are among the first of the data describing the economy's performance in July. Investors are looking at such statistics with greater scrutiny after a wide range of numbers, from hiring to retail sales, showed unexpected weakness last month. For some, the June performance raised fears the economy's recovery effort might be stalling out, although Federal Reserve officials have on numerous occasions said they believe the weakness is transitory.

The big test for the markets regarding July's economic vigor comes next week, when the government releases data on non-farm payrolls for July. Economists are expecting to see a strong gain, ranging to as high as 300,000 new hires, in part based on consumer confidence data showing favorable assessments of hiring during the month.

But regardless of what happens with the upcoming data, most still agree the Fed is on track for another quarter-percentage-point interest rate increase when it meets August 10, as the central bank continues on a campaign to push extremely easy policy levels back to more normal levels.

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