September U.S. auto sales are seen rising to their highest since April when the earthquake in Japan began to impact inventory and demand, but a weak economic outlook will curb the pace of the industry's recovery in the coming months.

Japanese automakers Honda Motor Co Ltd <7267.T> and Toyota Motor Corp <7203.T> will finally have enough inventory to compete in the market and both will show gains in September market share, particularly Honda, said Jessica Caldwell, an analyst with Edmunds.com.

The March 11 earthquake in Japan clipped the recovery of the auto industry from the 2008-2009 recession that led to the lowest per capita sales rate since World War II.

September results should be the cleanest number we have seen since April, without the Japan earthquake impact, said Peter Nesvold, an analyst with Jefferies & Co on a conference call on Thursday.

J.D. Power & Associates and Edmunds.com each forecast 12.9 million vehicle sales for September on the seasonally adjusted annualized rate the industry watches, up 9 percent from September 2010 and up 7 percent from last month.

That would be near the 13.1 million vehicles annualized sales rate from the first four months of the year.

Auto sales, which will be reported on October 3, are an early indicator each month of U.S. consumer demand.

Weak economic indicators are dragging down what should be a more robust recovery based on deferred purchases from as far back as 2008, said Caldwell and Lacey Plache of Edmunds, who spoke on the same conference call as Jefferies' Nesvold.

Mike Jackson, chief executive of AutoNation Inc , the largest U.S. auto dealer group, said last week he is convinced that auto sales will rise in the fourth quarter of the year, despite a weak economy.

Honda's U.S. sales have suffered the most since April and the automaker will have the highest gains in September, by a percentage point or more in market share, said TrueCar.com. TrueCar said Honda's sales will show a rise of about 15 percent from August.

TrueCar and Edmunds both forecast General Motors Co will take about 20 percent of the U.S. new vehicle market share, followed by Ford Motor Co at 17 percent, Toyota and Chrysler Group LLC near 12 percent, followed by Honda and Nissan Motor Co Ltd <7201.T>, both near 9 percent.

INCENTIVES NOTCH UP

Sales incentives rose in September and will continue to rise along with deliveries to auto dealerships, Caldwell said.

Caldwell said on Thursday that incentives will not rise precipitously, echoing what Jackson said last week.

The incentives will be strong between now and year-end, said Jackson. Market communication (advertising) will be strong and the message will be everybody's back in business and if you need a car come on in and get it.

Industrywide, September sales incentives will show a rise of about 2.6 percent from August, Caldwell said, with Honda leading the way with a 15 percent rise.

Nesvold said the strong yen leaves the Japanese little room to boost incentives much and they will spend more on advertising to regain lost customers.

U.S. pickup trucks sales will show a rise to their largest share of retail purchases since last December, Ford sales analyst George Pipas said.

Caldwell said pickup truck and SUV sales are expected to continue taking a larger share of the market as winter approaches.

Average U.S. gasoline prices have fallen about 4.5 percent from a month ago, according to the AAA motor club.

Edmunds lowered its full-year 2011 forecast to 12.6 million vehicles, up from 2010's 11.6 million in sales, but down from the annual average of nearly 17 million vehicles in the decade prior to 2008 when the downturn began.

(Reporting by Bernie Woodall Soyoung Kim in Detroit; editing by Andre Grenon)

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