UPDATE 1-Argentina July primary budget surplus widens 37 pct yr/yr

* Overall fiscal deficit balloons to 2.88 bln pesos

* Gov't says its spending aimed at boosting demand, jobs

BUENOS AIRES Aug 31 (Reuters) - Argentina's primary budget surplus expanded 37 percent in July from a year earlier to 529 million pesos ($114 million), mainly reflecting heavy capital spending in July 2011, the government said on Friday.

The data was released about 10 days later than normal, with the Economy Ministry providing no explanation for the delay.

The primary budget balance shows government savings before debts are paid. It is an important indicator of fiscal health in Argentina, which has been virtually shut out of global credit markets since a 2002 default.

Argentina's overall fiscal deficit widened to 2.88 billion pesos, compared with 197 million pesos in July 2011.

The government said that July's primary surplus showed a deceptively large increase over July 2011 because capital spending in the year-earlier period spiked.

It said so far this year, "the primordial objective of fiscal policy has been to counteract the global financial crisis' negative impact by strengthening the domestic market, supporting production and employment."

Primary spending in July rose 25 percent year-on-year to 63.87 billion pesos, while government revenue rose by the same rate to total 64.40 billion pesos.

The primary surplus totaled 387 million pesos in July 2011.