What: August U.S. auto sales results

When: Wednesday, September 1, starting at about 10 a.m. EDT

Consensus 11.6 million vehicles on an annualized basis

Low consumer confidence, employment a concern

By David Bailey

DETROIT - The U.S. auto industry felt like it dodged a bullet in July when retail sales to consumers held up and confounded forecasts for a drop, but then August came and that sense of relief went out the window.

With a still-critical last weekend of sales left that could change the outlook, August U.S. auto sales are expected to offer more evidence of a slower-than-expected industry recovery as General Motors Co prepares its IPO.

Sales have risen from the worst depths of the downturn last year, but how much farther the rebound goes and how long that will take depends in large part on a strengthening in the economy that would boost consumer confidence and employment.

We are crawling around, Jesse Toprak, an analyst at industry-tracking website TrueCar.com, said Friday. It feels like we got a dead car to jump-start but we just can't get it to go over 20 miles an hour.

U.S. economic growth was revised down to a 1.6 percent annual rate in the second quarter, pointing to an even softer third quarter, but analysts so far do not expect the economy to slide back into recession.

TrueCar expects U.S. auto sales to be down 3 percent in August from July and nearly 20 percent from a year earlier when government cash for clunkers incentives drove demand. The annualized rate is expected to be about flat from July.

Edmunds.com expects Chrysler to report a 6.4 percent sales gain in August from July and Honda Motor Co <7267.T> a 3.4 percent gain from last month.

Edmunds expects GM sales to be down 5.8 percent in August from July, Ford Motor Co down 3.2 percent, Toyota Motor Corp <7203.T> down 4.6 percent and Nissan Motor Co <7201.T> down 6.6 percent.

Analysts surveyed by Reuters forecast an average annualized sales rate of 11.6 million vehicles in August, with a range of 10.9 million to 11.9 million vehicles. That would be a slight increase from the 11.5 million unit rate in July.

SLOW GROWTH, OUTLOOK FLATTENING

Automakers face a dilemma in an environment where meeting broad sales targets has required increasing profit-sapping incentives on retail sales to consumers or adding to less-profitable fleet sales, analysts said.

U.S. auto sales are among the earliest snapshots of economic activity in a given month and nearly a quarter are booked in the last three days, making forecasting difficult.

Yet another month with a sales rate in the mid-11 million unit range is unlikely to ease investors' doubts around the shape of the recovery for the auto industry, Barclays Capital analyst Brian Johnson said in a note on Thursday.

Barclays expects August U.S. sales at an 11.5 million unit annual rate with a retail sales drop offset by fleet sales.

A disproportionate amount of the gain in U.S. auto sales this year has been from fleet sales, though credit availability has improved, JPMorgan analyst Himanshu Patel said Wednesday.

Patel expects August U.S. auto sales to be slightly down from July and said a protracted soft patch or double-dip recession would suggest a flat to slightly lower annualized rate of sales as long as credit continued to flow.

TrueCar has forecast an 11.68 million unit annualized rate for August and Edmunds.com an 11.8 million rate.

U.S. auto sales hit bottom last year at 10.4 million vehicles, a drop from the most recent sales peak at nearly 17 million in 2005. The rate has averaged 11.2 million through July and analysts do not expect a return to peaks for years.

JD Power and Associates has trimmed its 2010 and 2011 U.S. auto sales forecasts, reflecting a flattening of the recovery and analysts have started to gauge the impact of a double-dip recession as economists cut U.S. growth forecasts.

All the measures that we track that correlate very strongly with new vehicle sales have largely been negative, particularly in the last two weeks, TrueCar's Toprak said. I think really what is being damaged here more than anything is the already very fragile consumer confidence.

(Reporting by David Bailey, editing by Matthew Lewis)

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