BusinessReport.com

NEW YORK (AP) — As consumers get ready to celebrate the Fourth of July, many merchants already have dismissed summer as a washout.

Macy's flagship store has racks of summer tops, swimwear and dresses marked down as much as 50 percent, while luxury retailer Bergdorf Goodman is slashing prices on designer goods by as much as 70 percent. Meanwhile, piles of clothing as well as barbecue grills, tents and gardening tools are bypassing stores and heading straight to liquidators as merchants try to conserve their cash.

Such deep discounting so early in the season is great news for bargain hunters, but it's a worrisome sign that shows a further weakening in retail sales since the end of May.

Consumers' confidence in the economy, which had surged in April and May, is projected to be virtually unchanged for June when The Conference Board releases figures today. Major retailers will release June sales results next week.

Some analysts wonder whether shoppers are waking up to the harsh reality that the economy won't be getting any better soon — even as consumer spending makes up 70 percent of economic activity.

That doesn't bode well for merchants, who need to get rid of summer inventory quickly to make room for fall goods that start to arrive next month.

BMO Capital Markets analyst John Morris estimates the volume and size of discounts for mall-based apparel retailers he tracks is 10 percent higher than June 2008 even though inventory is down 20 percent.

Pam MacWilliams, a tourist from Oshkosh, Wis., who on a recent Thursday was planning to scour for bargains at H&M's midtown Manhattan location with her two girls, said she's becoming less optimistic about a quick economic recovery. "I thought that the economy would turn faster. I had high expectations. Now I want to save more."

The nurse practitioner said her company no longer matches her 401(k) contributions, and she worries about the job security of her husband, a professor. So she's spent only $200 this month on clothes for her family, compared with about $600 in June 2008. MacWilliams also hasn't loaded up her lake house with the usual summer accessories like blowup toys.

Employers still are cutting jobs — although at a slower rate — and home prices still are falling. Now Americans are seeing a three-month stock market rally stall.

Consumers' confidence in the economy has been rebounding since February, fueled, in part, by the stock market rise. But that improved mood hasn't translated into much relief for merchants because confidence levels still are well below the 100 reading that's considered healthy.

"There was a lot of hope with the surge in confidence," said Dennis Jacobe, Gallup's chief economist. Consumers were convinced the second half of 2009 would be better, but "you can live on that hope for only so long," he added.

Confidence has faltered as stocks have stumbled and gasoline prices have risen, according to a Gallup Poll survey of 1,000 consumers taken June 15-21. And Jacobe said he's seen a deterioration in sales from May to June.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, estimates June's same-stores sales have registered a 6 percent drop, worse than the projected 5 percent decline and May's 4.6 percent decrease. The figures exclude results from Wal-Mart, which no longer releases monthly numbers. Same-store sales, or sales at stores open at least a year, are considered a key measure of retailers' health.

In the past, stores usually held out hope for procrastinators and didn't unload summer items until early August, said Bill Angrick, CEO of Liquidity Services Inc., which auctions surplus goods to dollar stores and small resellers. But "there is no normal in this economic cycle," so merchants are cutting their losses.

So far this month, the number of auctions completed is up 37 percent from the same period last year, Angrick said.

Patrick Byrne, CEO of online merchant Overstock.com, reports up to a 70 percent increase in goods it's received from retailers and suppliers compared with a year ago, particularly in apparel and accessories. In brand-name handbags, however, the number has more than doubled.

"We're getting a lot of calls over the last two weeks" from stores wanting to dump inventory, Byrne said. As for blaming weak business on the weather, he said, that's retailers just "putting a spin."