Auto sales in the United States and Europe slumped in August, reflecting the end of government sales subsidies and underscoring uncertainty about the strength of the U.S. economic recovery.

The monthly auto sales figures are one of the first and broadest-based snapshots of consumer demand.

Most major automakers posted double-digit sales declines in the U.S. market in August, led by Toyota Motor Corp <7203.T> and Honda Motor Co <7267.T>, which saw results plunge by a third from the subsidy-fueled gains of August 2009.

Initial sales figures from major automakers pointed toward a U.S. auto sales rate near 11.5 million vehicles on an annual basis, analysts and industry forecasters said.

That would be up from the 11.3 million sales rate of the second quarter but down sharply from the 14 million-plus in August 2009 when the U.S. government's cash for clunkers sales incentives touched off a short-lived boom.

General Motors Co , which is readying a stock offering intended to reduce the U.S. government's majority stake, posted a 25 percent sales drop for August.

Ford Motor Co reported an 11 percent sales decline, while Nissan Motor Co <7201.T> posted a sales drop of 27 percent. Toyota sales were down 34 percent; Honda dropped 33 percent.

Chrysler, now operating under the control of Fiat SpA , posted a 7 percent sales gain. The No. 3 U.S. automaker has relied more heavily than its rivals on less-profitable fleet operators, led by car rental agencies.

Almost 40 percent of Chrysler's U.S. sales through July were to fleet customers, according to industry estimates.

Under Chief Executive Sergio Marchionne, Chrysler has declined to disclose that figure, breaking with its larger U.S. rivals GM and Ford.

The U.S. market has failed to deliver the kind of accelerating recovery that most automakers had projected heading in to 2010 but major automakers said they saw no sign of a double-dip recession yet.

Based on what I'm seeing in the industry, I would be very surprised if it happened, said Al Castignetti, head of Nissan brand sales in the United States, who said the Japanese automaker was surprised by the volume of car shoppers at dealerships at the end of August.

CRAWL, STAGGER, REPEAT

The risk of a reversal in the U.S. economic recovery is a potential threat to GM's plans for an initial public offering expected to reduce the U.S. Treasury's nearly 61 percent ownership stake.

GM sales chief Don Johnson said the automaker expected that American consumers would remain cautious given a weak job market but that the industry would continue to recover from the 10.4 million vehicle sales of 2009.

We still see a low risk of any double-dip recession unless there's some unforeseen shock to the system, Johnson said on a conference call.

Paul Ballew, chief economist at U.S. insurer Nationwide and a former GM and Fed economist, said the August U.S. auto sales figures confirmed an exceptionally slow recovery under way.

The way we are describing it is as a crawl-stagger-crawl recovery, Ballew said. Vehicle sales are very much in a line with what we have seen with retail sales and a hesitancy that is out there with consumers.

Jeff Schuster, director of global forecasting for J.D. Power and Associates, said the August U.S. sales results pointed toward a flat-lining for the world's most lucrative vehicle market and second-largest by volume behind China.

The economy is underperforming expectations, but pieces of it are moving in the right direction, he said.

In one sign of a caution, Ford said it expected to build 570,000 vehicles in the fourth quarter, unchanged from its third-quarter production forecast.

That forecast bucked expectations that fourth quarter output would move higher. Ford said the cautious outlook reflected both the expected pace of industry-wide sales and the need to shut down lines to prepare for the launch of new vehicles, including a new Focus sedan coming in 2011.

Meanwhile, car sales in France, Spain and Italy fell, as government-funded incentives to spur sales of newer and more fuel-efficient models are fading or have run out in those markets.

In China, the world's biggest auto market, passenger car sales jumped almost 60 percent for the month, a sharp improvement from the sales rise seen in July. (For a graphic on August car sales in China, Japan, France and Spain, see: http://r.reuters.com/kaw68n )

But runaway growth has been tapering in the world's No. 2 economy since the second quarter as the government tries to stop the economy from overheating, and executives are cautious about the outlook for the rest of the year.

China's car sales rose to 977,300 in August, according to the government-affiliated China Automotive Technology & Research Center.

Auto sales in Japan rose sharply in August, led by Toyota, Honda and others, as consumers bought before government subsidies expire at end-September.

But Japanese automakers are bracing for a hard landing after subsidies disappear. The government has allocated $6.9 billion for the initiative and that pool looks set to run dry in less than two weeks at the current pace of registration.

(Additional reporting by Chang-Ran Kim in Tokyo, Helen Massy-Beresford in Paris, Miyoung Kim and Hyunjoo Jin in Seoul, Sonya Dowsett in Madrid, Phil Blenkinsop in Brussels, Antonella Ciancio in Milan, Gianni Montani in Turin and Bharghavi Nagaraju in Bangalore; Editing by Matthew Lewis and Erica Billingham)

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