Government policymakers are waiting anxiously for today's report on the consumer price index, hoping that retail food prices will show their first moderation since the start of the year.
Earlier this month, the Labor Department reported that farm prices fell 2.5 percent in July and the wholesale price of foods ready to be sold to grocery stores declined 0.3 percent.
But even if falling food prices give the consumer a temporary respite from inflation, the sharp increases in the overall consumer price index in the first half of the year - it rose at an annual rate of 10.4 percent - will trigger cost-of-living increases in many labor contracts.
Those wage increases in turn will put pressure on costs in other non-food sectors of the economy, forcing businesses to raise prices or "eat" the costs in the form of lower profits.
Because of the continuing persistent inflation, administration officials are hard at work beefing up the government's voluntary program to restrain wage and price increases.
But officials concede privately that, although they are exploring a number of avenues to fight inflation, there is really little that can be done in Washington beyond trying to control government actions that exacerbate inflation, and urging business and labor to restrain their demands.
Barry Bosworth, director of the Council on Wage and Price Stability, has said that major industrial unions such as the Teamsters - that have done well for most of the decade will have to reduce their wage demands to the levels achieved by most workers if inflation is to be reduced.
So far, however, major contracts negotiated in 1978 in the coal and railroad industries have been too large as far as the White House is concerned. And a recent, relatively moderate postal agreement has been rejected by the unions.
Officials said yesterday that the president hopes to have Phase II of his anti-inflation program ready to announced in late September.
A number of Carter's advisers are becoming interested in the notion of trading off certain government actions in return for responsible wage and price behaviour - such as pulling government contracts from companies that raise prices too much.
The government also has said it is reviewing the so-called Davis-Bacon Act which sets the standard for wage rates on federally assisted construction projects as part of an overall attempt to chip away at costs of government contracts.
In other developments yesterday:
Machine tool orders dropped 17 percent in July from their record June level, but analysts said the decline appears to be seasonal and that demand for machine tools should remain strong for most of the rest of the year, at least.
The Labor Department revised upward its productivity estimate for the economy from an increase of 0.1 percent at an annual rate in the second quarter to 0.8 percent. Productivity measures output-per-hour-worked. When productivity is rising healthily - 0.8 percent is not a healthy rise - employers can absorb wage and other cost increases without having to raise prices.