U.S. May auto sales are off to a dismal start as lower sales incentives, thinner inventories and high gasoline prices are curbing consumer purchases, J.D. Power and Associates said on Thursday.

The lower inventories due to the aftermath of the Japan earthquake and auto parts supplier problems have meant some vehicles are not readily available. This in turn has allowed dealers and automakers to further cut incentive spending, which results in higher outright vehicle prices.

The U.S. auto industry, led by improved pricing discipline by U.S. automakers including General Motors Co and Ford Motor Co , has been gradually lowering consumer sales incentives in the past year. GM hiked incentives in January and February, but lowered them since, analysts Edmunds.com and Truecar.com have said.

Jeff Schuster, director of global forecasting for J.D. Power and Associates, said that lower sales incentives are probably the biggest reason for the May sales slump.

The industry will likely be dealing with a lower sales pace at least through the summer selling season, putting pressure on the 2011 outlook, said Schuster.

TrueCar analyst Jesse Toprak said that May incentives for U.S. auto sales will be at their lowest per-vehicle rate for any month in the last five years.

Schuster of J.D. Power said North American production will be cut by about 400,000 vehicles in the second quarter.

Earlier this week, federal data showed that U.S. auto production was down 9 percent in April, which caused Deutsche Bank to cut its second-quarter GDP forecast. Deutsche Bank forecast second-quarter auto production to fall 8.7 percent versus the first quarter.

LOWER SALES INTO 3RD QUARTER

J.D. Power's Schuster said lower U.S. auto sales will continue into the third quarter although North American production is expected to be back to normal levels by the end of the second quarter or the early third quarter.

Still, for now, J.D. Power said it was maintaining its full-year 2011 outlook at 13 million vehicles, up from 11.6 million in 2010.

Edmunds.com said several days ago that the average price of a vehicle sold in the United States has risen $350 since the March 11 earthquake and tsunami in Japan.

J.D. Power said consumers were showing signs of being wary of spending during a sharp uptick in gasoline prices. Federal government statistics show the average price of U.S. gasoline this week was $3.96 per gallon, $1.10 higher than a year ago.

The U.S. Energy Department this week said gasoline prices may have already reached their high for 2011, based on lowering crude oil and gasoline prices recently.

J.D. Power said it expected U.S. sales of 11.9 million light vehicles in May at the seasonally adjusted annualized rate that the auto industry uses to gauge its performance. That would be down from 13.2 million on an annualized basis for April, but 6 percent higher than May 2010.

J.D. Power lowered its 2011 retail sales forecast to 10.6 million units from 10.7 million.

It said the May retail sales on an annualized rate would be near 9.6 million units, down from 11 million in April, but up 10 percent from May 2010.

Retail sales do not count fleet sales, which are included in the total light vehicle sales figures. Fleet sales are bulk sales to daily rental agencies, government and businesses.

J.D. Power said that in the second half of 2011, the U.S. auto industry recovery from the 2008-2009 downturn will resume the pace seen in the early part of this year before the March 11 earthquake in Japan.

(Reporting by Bernie Woodall; Editing by Lisa Von Ahn, Bernard Orr)

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