Strong demand for Japanese products like the Toyota Camry is helping prop up the U.S. auto market.

What economic downturn?

While economists – and politicians – continue to debate the health of the U.S. economy, auto dealers continue to ring up strong sales.  Preliminary data suggest that August is on track to deliver a 16% increase over year-ago levels, maintaining the strong pace the industry had set during the first half of 2012 despite some earlier concerns that the U.S. new car market might be slowing down.

If the preliminary data holds true for the final days of the month, the annualized sales rate for August could reach 14.5 million, the best figure for the year so far.

“August continues this summer’s trend of healthy growth in retail sales as dealers work to sell down inventory in time to make room for 2013 models,” says John Humphrey, J.D. Power senior vice president of global automotive operations.

Significantly, Power’s retail tracking system indicates that incentives have actually been cut this month, across the industry, despite the typical push for manufacturers and dealers to clear out showroom lots for the new model-year’s line-up.

A variety of factors appear to be propping up industry momentum.  Most analysts believe the industry is still benefiting from pent-up demand from motorists who put off purchases during the worst of the recession, suggests Edmunds.com analyst Ivan Drury.  Meanwhile, research by LMC Automotive shows that the average vehicle currently being traded in is at least 6.2 years old – at least a year older than the norm prior to the 2008 start of the last recession.

Japanese makers, notably Toyota and Honda, are also picking up business lost during 2011 when dealers were desperately short of inventory in the wake of Japan’s devastating March earthquake and tsunami – which led to months of production shortages.

But those makers are also gaining traction because of “significant new products,” insists Toyota Senior Vice President Bob Carter, pointing to vehicles like the Camry sedan and the Lexus GS.

Indeed, new product has traditionally helped the industry gain momentum and 2012 saw a flood of new offerings from Japan, Europe, Korea and Detroit, with even more models slated for 2013.  Nowhere is that more apparent than in the crucial midsize sedan segment.  Toyota fired the first shot with the 2012 Camry. Chevrolet followed with the early launch of the new Malibu Eco – a more mainstream version following for 2013.  Nissan recently re-launched the Altima, declaring its intent to be number one in the segment. And both Honda and Ford are soon to follow with complete remakes of their Accord and Fusion models, respectively.

Another positive factor is the increased availability of financing.  Three years ago, even good credit risks struggled to line up auto loans and leasing had all but stopped.  Today, even sub-prime lending has become widely available – albeit at a stiff price.  And most makers have returned to the leasing market, though the major deals of the past are often more difficult to find.

Industry analysts have been watching closely to see how automakers might respond to a slowing market.  So far, most manufacturers have maintained their discipline, tying production more closely to demand.  As a result, dealers have an average 54 days worth of vehicles in stock, a bit under the industry norm of 60 to 65 days – and down from 58 days of inventory in July, according to Power.

Notably, passenger car inventory is a relatively modest 47 days, with trucks at 61 days supply.  That underscores the shift in this year’s market as more and more motorists abandon pickups and SUVs for sedans, coupes and car-based crossovers in a bid for better mileage.

Another positive factor for the market is that makers are steering clear of fleet sales more than in past year.  Rental firms and other fleet customers have so far generated about 17% of August demand, according to various tracking reports, down from the 21% tally for the first seven months of 2012.

Whether makers will continue that shift – while also keeping supply and demand in balance – remains to be seen.

“Going forward, this discipline will be tested as demand looks to cool somewhat through the balance of the year,” warns Power analyst Humphrey.