New-vehicle retail sales in August are forecasted to cross the 1-million-unit mark for the first time in the past 12 months, boosted by the government-funded Car Allowance Rebate System (CARS) program, according to J.D. Power and Associates, which gathers real-time transaction data from more than 10,000 dealerships across the United States.

Based on the first 13 selling days of the month, new-vehicle retail sales for the month of August are expected to come in at slightly more than 1 million units, up nearly 2 percent from one year ago. This marks the first increase in retail sales volume since June 2007.

"Improved consumer confidence and credit availability during the past six months have combined with the CARS program to lift industry sales out of their slumping year-to-date levels, which have been down approximately 35 percent year-over-year," said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. "These factors set the foundation for a gradual recovery in the months ahead. Reduced inventories will likely hold back some of this momentum, but the automakers are moving quickly to ramp up production and rebuild stock."

As inventory is channeled to retail sales, August fleet sales are expected to decline by more than 50 percent compared with one year ago. As a result, August total light-vehicle sales are projected to come in at 1.1 million units, down just 8 percent from August 2008. The August seasonally adjusted annualized rate (SAAR) for total vehicle sales increases to 12.2 million units, up 1.2 million units from July.

Given the positive impact of the CARS program, J.D. Power and Associates is increasing its forecast for 2009 to 10.3 million units for total sales. Retail sales are projected to come in at 8.6 million units - 300,000 units more than previously expected - while the projection for fleet sales has been reduced to account for a shortage in inventory.

"Amid relative economic stability and a more disciplined management of fleet sales, the industry is showing signs of a more rational balance of sales and production levels," said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. "However, there is risk that the expected pullback in sales as the CARS program ends could be magnified if manufacturers reduce incentive levels. This could stall the recovery and negate the boost that the program has generated in the third quarter."

In light of the expected pull-ahead sales as a result of the CARS program and a flatter-than-anticipated recovery, J.D. Power and Associates has lowered its forecast slightly for 2010 to 11.5 million units for total sales and 9.5 million for retail sales.