Canadian auto sales rose to their highest level in nearly three years this summer on the back of rebounding employment levels and steep incentives from automakers, according to a report by Scotia Economics.

Car and light truck sales rose to an annualized 1.62 million vehicles in June and July, from 1.48 million in May, the report said.

Sales came in at 1.46 million vehicles last year when the global auto industry suffered one of its biggest-ever declines amid the recession.

Scotia said it expects Canadian auto sales of 1.57 million in 2010 -- up from an earlier estimate of 1.53 million -- and 1.59 million in 2011, in line with the average of the last decade.

The rising Canadian numbers diverged from a global trend which saw July auto sales fall below year-ago levels, after a big surge earlier in 2010.

Carlos Gomes, senior economist at Scotia Economics and author of the report, said the global slowdown was largely due to a double-digit decline in Western Europe following the end of scrappage incentives.

However, outside of Europe, purchases have also started to moderate, with volumes advancing year-over-year by only 9 percent last month -- the smallest gain since last summer, he said in a release.

In Canada, sales were aided by stronger than expected job creation in recent months, as well as higher incentives by most automakers, the report said.

Gomes said he expects the pace of Canadian sales to ease going forward as manufacturers scale back on incentives, which they have already done in the United States.

Major automakers are expected to release their Canadian sales figures for August on Wednesday.

(Reporting by John McCrank; editing by Rob Wilson)