U.S. consumer sentiment fell in July but improved in the second half of the month even as a merciless stock market sell-off dealt a blow to Americans' expectations for the future.

The University of Michigan's final consumer sentiment index fell in July to its lowest level since November 2001, to 88.1 from 92.4 in June, market sources said Friday. That was better than economists' forecasts for 86.5, where the index stood at mid-month.

Analysts are closely watching indexes of consumer confidence for clues on whether consumer spending, which drives about two-thirds of the economy, will maintain its strength. So far spending has held up despite a slide in sentiment.

The preliminary current conditions index, which tracks consumers' views about their present financial situation, was little changed in July, off at 99.3 from 99.5 in June. But the preliminary July index read 99.0. The expectations index, which measures attitudes about the 12 months ahead, fell to 81.0 in July from 87.9 in June but was up markedly from a preliminary reading of 78.5.

The University of Michigan consumer sentiment survey is based on telephone interviews with roughly 500 Americans across the country on personal finances and business and buying conditions and completes a preliminary round with roughly 250 interviews.