The government yesterday reported the first genuine good news on the inflation front this year.
The Labor Department said that wholesale prices fell 0.1 percent in August, the first such decline in two years. The index fell mainly because of a 1.5 percent drop in food prices, the chief culprit in inflation this year.
The announcement triggered a sharp rise in stock prices and buoyed the dollar against major European currencies.
But administration officials, who had anticipated a decline in food prices, warmed that inflation remains the nation's central economic problem. They are now at work revising the largely ineffectual anti-inflation program that has been in place since last April. The new program is expected to include some form of wage and price guidelines.
The decline in wholesale prices reported yesterday resulted not only from the drop in food prices but also because of a marked showdown in the rate of increase in prices of other commodities - from clothing for consumers to machine tools for businesses.
These non-food items, which rose 0.8 percent in July, or an at annual rate of about 11 percent, increased only 0.4 percent in August.
Economists look more carefully at nonfood price increases because they become imbeded in the overall price level, while food prices have a tendency to rise an fall less predictably.
In large part because of rising food costs, the consumer price index, which generally reflects earlier movements in wholesale prices, rose at an annual rate of 10.4 percent in the first six months of the year.
But last month's 1.5 percent drop in wholesale food prices, coupled with a decline of 0.3 percent in July, indicates that the break in the food price spiral the administration has been expecting has occurred.
Presidential inflation counselor Robert S. Strauss said yesterday the August price report supports administration predictions that inflation will moderate during the last half of the year, primarily because food costs will decline. But Strauss has said he expects consumer prices to rise about 8 percent for the year, much higher that the 6 percent President Carter had anticipated last January.
Strauss said yesterday's report makes him neither more encourage nor more discouraged about inflation prospects for the rest of the year.
To prepare for the spate of new wage negotiations that will occur next year, the administration hopes to announce soon a stronger, but still voluntary, anti-inflation program that contains economy-wide wage and price guidelines.
But the new program may be no more effective than the current one, largely because organized labor remains adamantly opposed to any program that contains guidelines.
AFL-CIO sources said yesterday that its president, George Meany, is preparing to deliver an "extremely strong attack" on the idea of any sort of guideline program when he speaks to the convention of the United Steel Workers in Atlantic City on Sept. 18, the day before Carter is scheduled to address the same convention.
"It's a natural audience for such a speech," an official of the AFL-CIO said. "One, it's a major industry in the economy, and two, Meany will be appearing the day before the president."
Administration officials have said that Carter does not want to discuss his anti-inflation program at the steel-workers' convention, the president's first speech to a major union group since his election. "He didn't want to have to go up there and tell them they were going to have to eat less," an administration official said.
But if Meany sharply denounces a guideline program, the president might be forced to change his mind.
Yesterday's report of a decline in wholesale prices helped push up the Dow-Jones index of major industrial stocks 14.03 points to 907.74.
The dollar also made strong gains against major European currencies, in part because of the inflation news.
John Layng, the top price analyst for the Department of Labor's Bureau of Labor Statistics, said that price increase for the rest of the year probably will be fewer and smaller than in the first six months.
Alan Greenspan, a New York economic Advisers, said that he thinks that price increases will slow to an annual rate of less than 6 percent during the final months of the year.
After that, Greenspan warned, a spate of new labor agreements and a scheduled increase in the minimum wage will push up costs and put pressure on prices.
If the decline in August's wholesale prices shown up in the August consumer price index - which will be released later this month - the Federal Reserve Board may ease up on its drive to push up interest rates to make money more expensive and hold down inflation. Many analysts worry that if the central banks finds it necessary to continue to raise interest rates - it apparently raised them some yesterday - a recession could ensue.
The 0.1 percent decline reported by the Labor Department was for its August index of finished goods - those commodities, such as cars or bread, that are ready to be sold to the final consumer, either a business or an individual.
Prices of semi-finished goods, such as steel or flour, rose 0.5 percent in August, while prices of raw commodities, such as weat or iron ore, fell 1.3 percent.
The finished goods index itself stood at 195.3 percent of its 1967 average, which means that a selection of goods that cost $100 in 1967 cost $195.30 last month. Although the Labor Department adjusts all its percentage calculations to account for seasonal changes, it does not seasonally adjust the index itself.