As the stock market yo-yos up and down and other economic indicators sway, prompting a revision of annual sales expectations, J.D. Power and Associates insist August new-vehicle retail sales have yet to spark a stronger recovery, but the selling pace continues to increase slowly from its low point in May.

Based on real-time transaction data from more than 8,900 franchise dealers throughout the U.S., J.D. Power indicated August new-vehicle retail sales are projected to come in at 898,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.9 million units.

The retail selling rate is higher than in July, although analysts said volume remains essentially flat. They reiterated their belief that retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“The selling rate in August is expected to be slightly stronger than in July, but without a significant increase in incentive levels or a reversal of the economic woes, there isn’t a compelling reason for those consumers sitting on the fence to return to dealer showrooms and purchase a vehicle,” explained Jeff Schuster, executive director of global forecasting at J.D. Power.

“There is little question that a strong level of pent-up demand exists, but economic and financial uncertainty is keeping it from being released,” Schuster continued.

J.D. Power thinks total August light-vehicle sales should come in at 1,074,900 units, which is just 4 percent higher than in August of last year.

Like July, analysts pointed out that August is normally a low fleet month with sales of 177,000 units expected — which is 16 percent of total sales.

Revised Annual Sales Outlook

Given the recovery stall that continues to persist and lower expectations for growth in the economy, J.D. Power lowered its forecast for light-vehicle sales in 2011 and 2012.

Analysts also think the slower recovery is expected to extend into next year.

As a result, J.D. Power projected total light-vehicle sales for 2011 to come in at 12.6 million units. That figure still represents a 9-percent increase from 2010 but is down from the previous forecast of 12.9 million.

J.D. Power’s retail light-vehicle sales forecast now stands at 10.2 million units for the year, off from its previous estimate of 10.5 million units.

For 2012, J.D. Power’s outlook for total light-vehicle sales has been reduced to 14.1 million units, down from 14.7 million. Retail light-vehicle sales are now projected to settle at 11.5 million units, off from 12 million.

“The economy and automotive industry continue to wrestle with a series of unsettling developments, which are now likely too strong to overcome within 2011,” explained John Humphrey, senior vice president of automotive operations at J.D. Power.

“While it is not time to hit the panic button, it is clear that ascending from the recession is proving to be just as bumpy as the decline into it, and a full recovery in vehicle sales is further down the road than previously thought,” Humphrey added.

North American Production Projections

J.D. Power calculated light-vehicle production in the North American region has increased by 8 percent through the first seven months of this year, compared with the same period a year ago. That jump has resulted in volume of 7.3 million units.

At the country level, analysts contend production in Mexico is showing the strongest year-over-year change, rising 16 percent with the addition of the Fiat 500, Ford Fiesta and new Volkswagen Jetta models.

J.D. Power said the U.S. follows Mexico with an 8-percent increase, while volume in Canada is off 1 percent — hurt by production losses from Honda and Toyota.

The firm went on to note vehicle inventory has decreased to a 49 days’ supply at the beginning of August, down from a 54-day level in early July. J.D. Power thinks this drop is mainly due to the typical July shutdown at many of the assembly plants.

Analysts also mentioned car inventory was at 40 days while truck supply was at 58 days — both low for their respective norms.

J.D. Power noticed several manufacturers continue to have limited availability. Two OEMs mentioned specifically were Hyundai/Kia with a 19 days’ supply and Honda with a 28 days’ supply.

“Production continues to support inventory replenishment, but it likely won’t be until October before closer-to-normal industry levels (60 to 65 days) are reached,” J.D. Power surmised.

Furthermore, J.D. Power’s trimmed its North American production outlook slightly, but analysts continued to round it to 12.9 million units.

“The decrease is the result of the reduction in the outlook for vehicle sales, but it is not as severe due to the current low level of inventory,” analysts indicated.

“Had the sales pace returned to the strength shown at the beginning of 2011, production would have needed to be increased in order to meet the demand and replenish inventory levels by the end of the year,” they concluded.