WESTLAKE VILLAGE, Calif. — The new-vehicle retail selling rate in August is expected to decline slightly from a relatively strong level in July, but remains above the selling rate from the first half of 2010, according to J.D. Power and Associates.

Retail Light-Vehicle Sales

August new-vehicle retail sales are expected to come in at 857,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 8.9 million units. August’s selling rate is expected to decrease slightly from July’s selling rate of 9.2 million units. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“Incentive levels are down 8 percent from July, but retail light-vehicle sales in August are showing relative strength,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “While August retail sales are expected to be down 22 percent from August 2009, if the distortion from 2009’s CARS program is removed, August 2010 is actually up about 14 percent on a selling day-adjusted basis, signaling continued improvement year over year.”

Total Light-Vehicle Sales

Total light-vehicle sales for August are expected to come in 15 percent lower than August 2009, which was impacted by the CARS program. However, with an increase in fleet activity, the August selling rate is up by 300,000 units, compared with July. Fleet sales in August are expected to account for 17 percent of total sales, which is down from the year-to-date level of 22 percent, but significantly higher than August 2009 when fleet sales accounted for 9 percent of total sales.

Sales Outlook

As a result of the lower-than-expected retail sales rate, J.D. Power and Associates has revised its 2010 forecast downward slightly to 9.2 million units for retail sales (from 9.4 million units) and 11.6 million units for total sales (from 11.7 million units).

The flattening of the recovery is expected to extend into 2011, impacting the sales outlook for the year. J.D. Power’s 2011 forecast has been revised downward to 10.7 million units for retail sales and 13.2 million units for total sales.

“Lower consumer spending—fueled by current economic conditions and a high unemployment rate—and lower incentive expectations are impeding the pace of the recovery,” said Schuster. “While a sharper uptick in vehicle sales was previously expected for 2011, the reality of a prolonged recovery has driven a reduction in the forecast.”

North American Production

On a year-to-date basis through July, North American vehicle production is up 67 percent, compared with the same period in 2009. The Detroit 3 manufacturers account for 61 percent of the increased production volume seen thus far in 2010. Overall, as production volumes in the second half of 2010 level off, light-vehicle production in North America is expected to end the year with almost 11.5 million units produced, an increase of nearly 35 percent from 2009.

Vehicle inventory continues to be maintained at a disciplined level, with days supply at the end of July decreasing slightly to 52 days—three fewer days than at the end of June.

“Through industry-wide inventory management, manufacturers are showing impressive restraint in not overproducing,” said Schuster. “However, this restraint is causing shortages in certain vehicle lines, so the desired balance between supply and demand at a model level is still a work in progress.”