More bad inflation news is on the way. The consumer price index for January will be out Friday, and administration economists fear it may be up as much as a full one percent for the month, a compound annual rate of nearly 13 percent.
The same analysts spent a good part of last week poring over the horrendous details of what happened to wholesale prices last month, when the producer price index (PPI) shot up at nearly a 17 percent annual rate.
Because of weather factors, seasonal adjustment problems and, possibly, a perverse effect of the wageprice standards, the economists are still uncertain -- even after scrutinizing these numbers -- of the full inplications of so many goods producers raising their prices by so much.
Will the price surge subside after another month or two, or is the nation off to the inflationary races once again? The Carter economists disecting the price indices for clues don't know, but they are deeply worried.
Federal Reserve Chairman G. William Miller laid out the problem this week. "It should be possible to slow the pace of expansion -- and thereby relieve inflationary pressures -- without prompting a recession," Miller said. But he warned that "any further acceleration of inflation... would imperil this outcome."
Nevertheless, President Carter still seems willing on occasion to agree to policies that mean higher prices in order to get votes on some other issue. Sugar and textiles are two recent examples that aren't sitting well with some of his troops in the anti-inflation trenches.
The administration had been braced for a bad two or three months early this year, and its forecast of a 7.4 percent increase in the CPI from last December to next December assumed that would be the case. But the news has been worse abroad, and some private forecasters are raising their inflation predictions for the year.
For instance, Data Resources Inc., Otto Eckstein's economic consulting firm, now expects consumer prices to rise about 9 percent from December to December. That's more than a full percentage point higher than DRI's earlier forecast.
The January PPI numbers played a part in the DRI revision, and so did the decision by Abu Dhabi and Qatar, two members of the Organization of Petroleum Exporting Countries, to raise their oil prices another 7 percent on top of the general 5 percent OPEC increase that took effect Jan. 1. If other OPEC members follow, that will add 0.3 to 0.4 percentage points to the CPI this year
And United Auto Workers President Douglas Fraser, one of the few labor leaders to endorse President Carter's wage-price standards program, recently pulled back. "Time is running out..." Fraser declared. "By the time we open bargaining with the auto companies, I doubt that we will have a viable anti-inflation program."
Of Fraser's comments, Brookings Institution economist George Perry said, "When people like that withdraw their support, you have to take seriously the possibility that the wageprice program will fall apart."
The whole point of the Carter program is to persuade the major unions that will be negotiating new contracts this year -- including the Teamsters, whose contract expires at the end of March -- to settle for no more than 7 percent a year even though inflation has been running much higher, with the promise that it will be lower in the future.
Is that promise believable, or if it is, will it be for long? Not unless the price news gets better, most labor experts think. And not unless President Carter stops taking steps that add to, not subtract from, inflation.
For instance, after a sharp debate among his advisers last week, Carter chose to ask Congress to pass a bill guaranteeing a market price of 15.8 cents a pound for sugar, and maybe 16.3 cents. The current world price is about 8 cents, while the U.S. price is being supported by government payments at about 15 cents a pound.
The president has been giving ground on this issue for months because such influential members of Congress as Senate Finance Committee Chairman Russell Long (D-La.) and Senate Foreign Relations Committee Chairman Frank Church (D-Idaho) come from major sugar-producing states. Carter needs their backing for such items as the expected trade bill and possibly a new arms limitation agreement with the Soviet Union.
Similarly, to gain support for the trade bill, Carter has approved anew package of protectionist measures for the textile industry that could lead to higher prices for apparel. The industry will be protected from "surges" in imports.
If the large, widespread price increases reported in the PPI continue unabated, the administration has few options remaining. Because the voluntary wage-price program already has been pushed just about as far as a "voluntary" effort can be, what's left?
No one in the administration wants even to think about mandatory controls. And Congress is in no mood to make Carter's fiscal 1980 budget much tighter than it already is, most observers believe.
That will leave it up to the Federal Reserve. If the economy in fact does not slow down as expected, or if inflation is moving to a new, higher level, the Fed will tighten another notch, pushing interest rates still higher and, in the opinion of many private economists, tipping the economy into recession.
Moreover, the Fed's Miller warned this week that the administration's expectations for less inflation and faster real economic growth in 1980 are probably unrealistic. If inflation does turn out to be worse than expected next year, "then the prudent course for government policy would be to exercise a substantial degree of restraint even if it risks less real growth in 1980," Miller said.
Following such a "prudent course" would mean rising unemployment. That's the real implication of a new surge in inflation.