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U.S. vehicle sales seen up slightly this year

LAS VEGAS, Jan 31 (Reuters) - U.S. new car and light truck sales are expected to increase this year as the economic recovery puts the pedal to the auto industry's metal, a leading industry analyst said on Saturday.

Paul Taylor, chief economist at the National Automobile Dealers Association, said in a report that new vehicle sales will total about 16.8 million vehicles in 2004, up from 16.6 million in 2003.

That would still mark a decline from the all-time high of 17.4 million vehicles sold in 2000, however, a banner year for an industry that accounts for roughly one-fifth of U.S. retail sales.

Taylor's forecast is more conservative than some estimates. But he attributed that to an expected hike in interest rates in the latter part of the year and said sales above 16.8 million vehicles were still possible, thanks at least in part to "the strength of a recovering economy."

The key is the level to which automakers are prepared to ratchet up consumer incentives and deals such as cash rebates and interest free loans to lure customers into showrooms.

"NADA expects incentives to average about $3,000 per vehicle for the year," he said. "If manufacturers increase incentives, sales approaching 17 million units are clearly possible."

Taylor's forecast was released on the sidelines of NADA's annual convention in Las Vegas.

In a separate report issued ahead of the meeting here, which opened on Saturday, industry research firm J.D. Power and Associates forecast slow but steady growth in U.S. light vehicle sales over the next five years beginning with a total of 16.9 million units in 2004.

By 2008, that should increase to 17.6 million units, J.D. Power forecaster Steve Goodall said.

He said the bulk of the growth would come from America's continuing love affair with gas-thirsty sport utility vehicles.