Ford Motor Co will report its U.S. sales for July rose from a year ago on a late-month surge under the federal government's Cash for Clunkers incentive program, senior U.S. executives said on Sunday.

The July increase marks Ford's first year-over-year monthly rise since November 2007, just before the U.S. economic downturn began, and the first increase for any of the largest automakers since the start of the financial crisis a year ago.

The result is important to Ford, but it is also a very good indication for the economy, Ford U.S. sales chief Ken Czubay said in a telephone interview.

It was a deep hole that the entire economy was in, Czubay said. We may not be out of the hole, but we are seeing very encouraging signs in July.

Ford, the only U.S. automaker that has not restructured in bankruptcy with federal funding, has consistently outperformed the other six largest automakers in the U.S. market this year, with less severe sales declines than its rivals amid the lowest vehicle sales rate in nearly three decades.

The beginning of July was firming up for us and then a week ago last Friday the government's 'Cash for Clunkers' program kicked in and there was a substantial increase in business and that kicked us over the top, Czubay said. We don't know about the others, but we do know that we are going to have an increase year over year.

The Cash for Clunkers program took effect on July 24, a week before the end of the July sales period. Automakers will report their July U.S. sales on Monday.

The Cash for Clunkers program provides consumers payments of up to $4,500 for the purchase of a new car when an older vehicle is traded in for a more fuel-efficient one. The initial $1 billion of funding could cover 222,000 to nearly 286,000 vehicles.

Ford will also report its first year-over-year retail sales increase since July 2007, supported by sales of more fuel-efficient vehicles, chief sales analyst George Pipas said.

You are going to see large gains in almost every Ford product that is powered by a four-cylinder engine -- the Focus, the Fusion, Fusion Hybrid, the Escape small utility and its hybrid version, the companion Mercury products -- that is where the demand was, particularly this past week, Pipas said.

July's monthly U.S. seasonally adjusted annualized sales rate is expected to be the strongest of 2009, though weak by historical standards.

Czubay said the annualized rate, a figure economists use, was expected to be well into the 10 million unit range.

Automakers sold about 13.2 million light vehicles in the United States in 2008, a sharp decline from more than 16 million sold in 2007, but sales rates plunged further in the first half of 2009 to an annualized rate as low as 9.1 million in February.

No one is happy with a 10-plus (million unit annual rate), but it's a solid indicator for the economy that we are into the double-digits, Czubay said.

The sales downturn has left Ford burning cash and helped push its rivals General Motors and Chrysler into bankruptcy.

U.S. Transportation Secretary Ray LaHood said on Sunday in an interview with C-SPAN that the initial funding for Cash for Clunkers could last through at least Tuesday.

The U.S. House of Representatives has approved an additional $2 billion for the program. The extra funding, which the White House backs, is contingent on backing by the Senate.

Ford shares closed at $8 on Friday.

(Additional reporting by John Crawley; Editing by Leslie Adler)