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WESTLAKE VILLAGE, Calif. — Memorial Day — popularly viewed as the kick-off to summer, a time when consumers tend to be more willing to shop for new rides — is likely to provide a nice lift to May's new-vehicle retail sales, which began the month in a "wavering" fashion, according to J.D. Power and Associates.

The company projects that May's new-vehicle retail sales total will hit 874,000 units, an 11-percent gain over May 2009.

The seasonally adjusted annualized rate for new retail sales would be 9.2 million vehicles, down from April's pace of 9.6 million units, as May started the month rather slowly. But, the projected SAAR would be well ahead of the 8.3 million unit rate from a year ago.

"Compared with April, incentives this month are flat at $2,800, which is contributing to the slower sales pace," shared Jeff Schuster, executive director of global forecasting at J.D. Power.

"However, with the unofficial start to summer approaching, consumers are more inclined to consider purchasing a new vehicle, and it's likely that Memorial Day sales incentives will generate an even stronger close for May," he continued.

Helping to offset the slowdown on the retail side are fleet sales, which are likely to climb 52 percent year-over-year and hit 205,000 vehicles in May.

This would lift the total light-vehicle sales volume to 1.0794 million units, up 17 percent from the year-ago-period.

The resulting total SAAR would be 11.3 million units, compared with 11.2 million in April and 9.8 million in May 2009.

Looking forward, J.D. Power is projecting a modestly healthier 2010 than previously estimated, due to an apparently better-than-expected performance in the economy, enticing products that boost showroom traffic and a return to more substantial levels of fleet vehicles compared to last year.

Specifically, its total sales forecast has been notched up from 11.7 million to 11.8 million, and the retail sales forecast has climbed from 9.6 million to 9.7 million.

"Positive first-quarter GDP growth and favorable employment numbers suggest that the economy is performing slightly ahead of expectations," officials explained. "In addition, robust product activity is expected to drive consumers into showrooms, and fleet volume is being replenished from the low levels of 2009."

North American Production

Looking at production, the upward trend persisted in April. Officials noted that North American production volume was at 957,000 during April, a gain of 46 percent.

These types of upswings should remain for the rest of the second quarter, but are likely to subside in the third and fourth quarters, reaching a "more sustainable level of growth."

Overall, second-quarter production volume is expected to hit 2.9 million units, a 60-percent increase over last year.

Meanwhile, 2010 full-year production is on pace to reach 11.2 million vehicles, a 32-percent gain compared to last year's levels. This marked the second straight month of improvement in the rate.

And despite more vehicles being produced, J.D. Power suggested inventory level is under control, and is likely to finish 2010 with days' supply lower than 60, as there has been "diligent balancing of supply with demand."

Closing the year with that low of days' supply would be a marked improvement from January 2009, when the market crested at 118 days' supply.

Moreover, production gains have boosted capacity utilization. J.D. Power expects 64 percent capacity utilization for 2010, versus 47 percent a year ago.

"The increase in production levels is a much-needed buffer for the struggling automotive supply base that survived the debacle of 2009," Schuster pointed out.

"However, given the cost cuts that were made last year, there are some concerns that there may be struggles with some suppliers to meet the increasing demand for parts," he added.