Treasury Secretary W. Michael Blumenthal warned yesterday that big increases in wholesale prices this year have "built up pressures which will push up retail prices for the next few months."
"More bad price news is possible in the months to come," Blumental told a House Appropriations subcommittee. However, administration actions already taken "will result in some moderation as the year progresses," he added.
Some of the bad news is due today with release of the wholesale price index for March. The index, which measures the prices producers charge when they first sell their goods, will be up very sharply.
Some analysts expect a jump in the index for finished goods that could match January's 1.3 percent. That is a 16.7 percent annual rate of increase. The February rise was smaller, but still a full 1 percent in one month.
Once again the biggest reason will be increases in consumer foods, which probably rose more than 2 percent from February to March. And it is beef prices that are rising fastest of all.
Also on Capitol Hill yesterday, presidential adviser Alfred Kahn told a House Agriculture subcommittee that "under no circumstances" would the administration try to freeze beef prices. But he also said beef producers should not feel they were singled out for unfair attention if the government suggests people buy less beef.
"The situation is a delicate one," Kahn said. But, he added, "I cannot believe that the beef growers can see anything wrong with counseling buyers to be prudent."
Meanwhile, in New York a group of consumer affairs officials urged shoppers to begin observing "beefless Wednesdays," "Beef prices have far and away led in food price inflation," declared New York City Consumer Affairs Commissioner Bruce Ratner. "Consumers must fight back and cut back."
"One day less each week of beef consumption is the only way to really begin to reduce consumer demand," Ratner said.
Blumenthal, who has been pushing for another reduction in planned federal spending and tighter credit conditions, said that the administration does not expect recession this year, adding:
"But we do expect-and the economy badly needs-some relief from excess demand" conditions in some parts of the economy.
The Treasury secretary based his optimism on inflation in part on a slower economic pace in future months, particularly in homebuilding, where inflationary pressures have been "intense,"
Blumenthal also expects the administration's voluntary price standards to begin to have more effect soon, and that there will be less inflation due to higher prices for imported goods now that the dollar is much more stable.
There is a "real risk that the current temporary burst of inflation will greatly complicate our task" of bringing down inflation by encouraging workers to demand bigger pay hikes, he continued. If the price surge "is built into current wage demands, the wage-price spiral will be ratcheted upwards another notch," Blumenthal cautioned.
So far, however, the administration has had more problems with business not complying with its voluntary price standards than with new union contracts not meeting the pay standard. Nevertheless, the Council on Wage and Price Stability, (which Kahn heads, has yet to pinpoint a single company as being in violation on the price side.
And despite that difficulty of finding violators, the administration is expected to announce today a nationwide "price watch" program. Shoppers will be asked to provide the government "with information about what they consider to be unusual price changes so that we can check it out to determine compliance," according to one official.
The consumer effort will be concentrated in sectors in which prices are rising fastest, presumably food. There will be no badges for price-watchers, since that would snack too closely of former president Gerald Ford's abortive WIN-Whip Inflation Now-buttons.
Companies will also be asked to report any apparent price standard violators, something that some businessman have already been doing. CAPTION: Picture, Alfred Kahn: no attempt to freeze beef prices.