TORONTO - Record low North American vehicle inventories, particularly for popular Canadian-made cars, will boost production through the end of 2009 and well into 2010, according to Scotia Economics.

Auto industry analyst Carlos Gomes said strong U.S. vehicles sales in August, boosted by the government's "Cash for Clunkers" program, have left inventories at a record-low 30 days' supply, down from a normal of 65 days. Asian automakers' inventories are even lower, at an average 22 days' supply.

In response, automakers are ramping up production, which had been cut back dramatically as vehicle sales slumped and inventories ballooned due to the recession.

Gomes said vehicle assembly across North America climbed to an annualized 9.3 million units in July and August, up from seven million in the first half of the year.

"This increase is now filtering through the economy, helping overall activity transition from recession to recovery," Gomes wrote in his monthly Global Auto Report.

Current production plans, which include assembly of an annualized 10.3 million units in the fourth quarter, will add two percentage points to overall U.S. economic activity and at least one percentage point to Canadian economic activity in the second half of the year, Gomes said.

The boost in production could be even more rapid in Canada due to extremely low inventories of popular Canadian-made vehicles like the Toyota Corolla, Honda Civic and Chevy Camaro.

"The stock of Corollas at U.S. dealerships was virtually non-existent at the end of August at only 13 days' supply, as the model was the top pick in the 'Cash for Clunkers' program," Gomes wrote.

"Meanwhile, inventories for both the Honda Civic and Chevy Camaro stood at only 21 days."

Current plans will see vehicle production in Canada climb to an annualized 1.7 million units at the end of the year, almost 40 per cent higher than the 1.2-million-unit average in the first half of 2009.

The report found that the auto industry worldwide continued to gain momentum in August, with sales in China, India and Brazil leading the way with a 55 per cent increase.

In the U.S., annualized sales increased to 14.1 million units last month, lifting passenger vehicle sales above a year earlier for the first time since October 2007, due to the US$4,500 incentive offered by governments for consumers to scrap their old vehicles for new models.

Even without this incentive, U.S. sales would have climbed to a nine-month high of 10.5 million units.

In Canada, vehicles sales were an annualized 1.51 million units in August. Coupled with similar July sales, this is marks the best back-to-back performance since last October.

Scotia Economics is predicting full-year Canadian sales of 1.45 million units, but Gomes said volumes may be even higher than this due to scrappage incentives being offered by individual automakers, including Hyundai, Chrysler, Ford, General Motors and Volkswagen.