By Justin Hyde
DETROIT, June 28 (Reuters) - U.S. auto sales likely rebounded in June from a surprising slump in May as a boost in incentives lured more buyers to showrooms, industry analysts said this week.
Strong June sales would offer reassurance that American consumers are still willing to spend. But another weak month would raise a much stronger warning signal about the health of the industry and the fledgling U.S. economic recovery; auto sales account for roughly 20 percent of U.S. retail spending.
On average, Wall Street analysts expect June sales, to be reported on Tuesday, to run at a seasonally adjusted annual rate of 16.7 million vehicles. That would be below April's rate of 17.4 million but well ahead of May's 15.7 million, the lowest rate in nearly four years.
As with the rest of the economy, auto sales so far this year have been propped up by strong buying by retail customers, with sales to businesses, rental car agencies and other fleet customers off sharply. But in May, the decline extended to retail customers as well.
Dieter Zetsche, chief executive of DaimlerChrysler AG's Chrysler arm, on Thursday declined to offer a forecast for June sales but warned that there were "consistent signals that the market has softened" from earlier this year.
In the wake of May's decline, Detroit's Big Three automakers stepped up their cash rebates and other incentives. General Motors Corp. added rebates of up to $750 on many of its pickups, sport utility vehicles and midsize cars. GM said at the time it was simply matching existing offers from Ford Motor Co. .
Chrysler was forced to match GM's moves later in the month, including offering the first nationwide incentives on the Jeep Liberty SUV.
Before the increases, the Big Three were already averaging about $2,200 per vehicle in incentives.
Thanks to the increased incentives, a number of analysts expect GM to report higher June sales. Ford is expected to report a sales drop, although not as large as the double-digit declines it reported in some months earlier this year.
"The U.S. automobile industry is in a war, fought with incentives, and the winner is the consumer," Goldman Sachs analyst Gary Lapidus said in a research note.
Industry executives say the economic factors that drive car buying have weakened but remain healthy. The U.S. unemployment rate fell to 5.8 percent in May from a 7-1/2 year high in April. While consumer confidence declined in May, economists say the levels still suggest Americans are willing to spend.
Those signs have made automakers more optimistic about the remainder of the year. Ford has set its third-quarter North American production schedule 16 percent higher than a year ago, while GM has forecast a 0.6 percent increase. Analysts estimate Chrysler's third-quarter production will be 2 percent higher.