An increase in fleet sales in June will not be strong enough to fully offset weaker than expected retail sales, resulting in a decline in the total new vehicle selling rate compared with May, JD Power and Associates said ahead of this week’s sales stats, expected to start coming out on Thursday (1 July).

June retail sales are expected to come in at 768,000 units, a seasonally adjusted annualised rate (SAAR) of 8.6m, down from May’s 8.9m units, but up from June 2009’s 8.2m.

“With the improving economic environment, retail sales should be stronger than they currently are, but June marks the second consecutive month with a selling rate below 9m units,” said Jeff Schuster, executive director of global forecasting at JDPower and Associates. “In spite of the more favorable conditions, it appears that consumers remain skittish and have yet to respond by buying vehicles at expected levels.”

Bill Cawthon, an independent analyst who comments on US sales for just-auto concurred but added: “We should continue to see good truck/crossover sales; petrol is about US$0.10 higher than last year but still well below US$3.00/gallon.”

JD Power said fleet sales in June are again expected to offset some of the weakness in the retail market, with volume projected to total 203,000 units – up 59% from June 2009. As a result, total light-vehicle sales for June are expected to come in 971,000 units, up 13% from one year ago.

It reduced its retail sales forecast slightly to 9.5m units (from 9.7m but kept he total sales forecast at 11.8m.

“With the recovery not progressing as expected, it’s gut-check time for the automotive industry,” said Schuster. “The industry’s discipline will be put to the test even more in the coming months if a more pronounced recovery doesn’t get under way.”

Despite wavering sales, North American vehicle production continues to experience significant increases in year on year volume. Light vehicle production in May 2010 totalled more than 1m units, up 85% from May 2009. Production in June is expected to be strong, with the second quarter ending at 3m units – up 68%.

Inventory levels remain favorable, with days supply at the end of May decreasing to 49 days – eight days lower than at the end of April. As a result, the forecast for North American light vehicle production in 2010 has increased to 11.4m units (from 11.2m), up 34%.

Edmunds.com is forecasting a 16.6% May increase to 992,500 units.

Its SAAR forecast is 11.2m total units, down from 11.6 in May.

“The industry is still recovering from the pull-ahead sales generated in March and over Memorial Day weekend, when automakers – led by Toyota – offered unseasonably high incentives and drew out a lot of bargain hunters who may otherwise have waited to buy cars during the summer,” said analyst Jessica Caldwell.