* Passenger traffic up 6.4 percent yr-on-yr, cargo up 19.6 percent
* Slowdown in growth seen continuing into 2011
* Capacity growth seen outstripping growth in demand
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GENEVA/ZURICH, Sept 28 (Reuters) - Growth in air traffic slowed noticeably in August as this year's rebound from the economic downturn lost steam, the International Air Transport Association said on Tuesday.
Passenger traffic in August was 6.4 percent higher than a year earlier, against a 9.5 percent year-on-year increase in July, and freight traffic was 19.6 percent higher in August, down from a 23.0 percent increase in July, IATA said in its monthly traffic report.
"The rapid improvements in demand that we saw earlier this year are behind us. The slowdown of demand (growth) in August is consistent with our forecast for a tougher end to 2010 as government stimulus monies run out without having generated significant improvements in employment," said IATA Director General and CEO Giovanni Bisignani.
Slower demand growth in the second half of 2010 was expected to continue into next year, IATA said, adding that yields were not expected to grow because capacity was increasing faster than demand.
"The bounce from restocking is over. We do not yet see the strong consumer confidence needed to sustain the expansion with spending," Bisignani added.
In August, global passenger traffic was 2 percent above pre-recession levels of early 2008, while international cargo traffic was 3 percent higher, said IATA, which represents some 230 airlines accounting for 93 percent of scheduled international air traffic.
Domestic traffic is not included in IATA's statistics.
(Reporting by Jonathan Lynn and Jason Rhodes; Editing by Hans Peters)