WESTLAKE VILLAGE, Calif. -

Such factors as high fuel costs, softer incentives and supply challenges have weighed down new-vehicle retail sales in May, leading to expectations for a rather soft summer and a slightly weaker full-year outlook, J.D. Power and Associates said Thursday.

May has begun with “significant pullback” in new-car retail sales thanks to the aforementioned pressures, and the monthly new retail total will likely reach only 858,400 sales, J.D. Power projects.

The resulting seasonally adjusted annualized rate for new retail sales would be 9.6 million units, which despite being close to 1 million stronger than the year-ago period would be a dramatic drop from the 10.7 million unit pace the industry has averaged so far in 2011.

“Retail sales in May are being hit by several negative variables — specifically, high gas prices, lower incentive levels and some inventory shortages,” J.D. Power’s executive director of global forecasting Jeff Schuster said. “As a result, the industry will likely be dealing with a lower sales pace at least through the summer selling season, putting pressure on the 2011 outlook.”

As far as total light vehicle sales, including retail and fleet, J.D. Power is projecting a climb of 6 percent year-over-year to reach 1.07 million units for May.

The firm predicts that because of inventory shortages, fleet sales will fall 8 percent year-over-year to 214,600 units.

Looking Forward

Offering some projections for full-year 2011, J.D. Power said the outlook has started to “bear the risk” from the expected sales softening. As such, the yearly retail forecast has been trimmed from 10.7 million units to 10.6 million. J.D. Power is keeping its total sales outlook at 13 million units.

“Uncertainty is the driver of mounting risk to the forecast for light-vehicle sales in 2011, as gas prices hover at or above $4 per gallon and inventory is at very low levels in the small car segments,” explained John Humphrey, J.D. Power’s senior vice president of automotive operations.

“However, the pace of the recovery set in the beginning of the year is expected to resume during the second half of 2011,” he continued.

Production Projections

Next up, J.D. Power shared details about North American production numbers. So far this year, there has been a 12-percent softening. Through April,  production reached 4.3 million units.

That said, there obviously have been several disruptions and J.D. Power believes these will continue in the second quarter. Specifically, J.D. Power projects a short-term production loss of more than 400,000 units.

Days’ supply at the start of the month was 54 days, same as the beginning of April. That said, supply is still limited for a number of small cars and Japanese imports. J.D. Power indicated that there will continue to be pressure on inventory for the new few months with automakers continuing to replenish their stock.

J.D. Power has modestly trimmed its full-year production projection down to about 12.8 million units, compared to the prior forecast of 12.9 million.

"As the parts situation stabilizes and unaffected manufacturers increase production, most of the lost volume is expected to be recouped during the second half of 2011 at the top-line level,” officials noted.