The government reported yesterday what could be the first genuine break in this year's inflation spiral - a visible decline during July in wholesale farm and food prices.

However analysis cautioned the gain may prove short-lived. While farm prices fell dramatically, inflation worsened significantly in other sectors of the economy, cutting into prospects for long-term improvement.

In the first evidence of relief since last fall, the Labor Department's monthly index showed farm prices plunged 2.5 percent in July, while wholesale prices of food packaged for supermarkets dipped 0.3 percent.

The gains trimmed the rise in overall wholesale prices to 0.5 percent in July, down from increases of 0.7 percent in the two previous months. It was the best performance for the wholesale index since last March.

However, whole prices of non-food items rose 0.8 percent up from an 0.6 percent jump in June. And prices of crude materials, which influence producer prices later, leaped 2.3 percent.

Sharply rising farm prices have been the single biggest factor in the nation's return to double-digit inflation over the past eight months, and officials in the Carter administration have contended that the inflation rate would begin to subside when farm prices start to taper off. If the July dip continues into August, it could mark the start of that relief.

However, economists also cautioned that if nonfood prices continue at their present pace, the administration may not be able to meet its latest goal of holding the underlying inflation rate to 7 1/4 percent this year.

Jody Powell, President Carter's press secretary, told reporters the administration was "encouraged by" the July price report. But he conceded that the prices "still is much too high."

The administration is considering ways to toughen its present anti-inflation program, which officials concede has been infective. Policymakers are expected to come up with new recomendations in a few months.

The July increase of 0.5 percent translates into an annual rate of more than six percent. Over the past 12 months, the wholesale index has risen 8.1 percent.

The major decline in farm and food prices last month were in livestock, meats, poultry, dairy products, coffee, vegetable oils and beverages. Wholesale prices of fresh fruits and vegetables soared.

The increases in non-food prices were spread throughout a broad range of items. Large rises were recorded in wholesale prices of tobacco, drugs, apparel, household goods and autos.

Changes in wholesale do not necessarily influence retail prices on a dollar-for-dollar basis. Many firms either absorb their costs or cut back on labor or materials purchases elsewhere.

However, economists say wholesale prices will have to slow far more if the nation's underlying inflation rate is to return to below the present estimated 7.5 percent pace.

The inflation picture so far this year has been decidedly worse than either the administration or private economists had forecast. The White House had predicted a 6.5 percent pace, but inflation has run at a 10 to 11 percent annual rate.

Yesterday's increase brought the overall wholesale price index to 195.9 percent of its 1967 average. That means it took $195.90 to buy the same goods at the producer level last month that cost $100 11 years ago.