Suddenly the consumer price index (CPI), which has roared through the land seeking whom it might devour, begins to act more like a pussycat than a lion. So far this year consumer prices have risen at less than a 10 percent rate, compared with 13.2 percent for all of 1979 and 12.4 percent in 1980. On a monthly basis, the April pace was 5.1 percent at an annual rate, following 7.5 percent in March.
Are Americans finally getting a handle on inflation, nudging it firmly below double digits?
"We are making progress," says Lyle E. Gramley, "but I wouldn't say fundamental progress."
"Over the next six to eight months," says Charles L. Schultze, "the CPI looks good. But the longer-term thrust of inflation still is in the 9-to-10 percent range."
Rudolph G. Penner is "fairly optimistic, because we have several good things going for us," including stable oil prices and a "more experienced and productive work force, which should boost productivity."
Mr. Gramley is a governor of the Federal Reserve System. Before that he was an economic adviser to President Carter. Mr. Schultze, now with the Brookings Institution, was chairman of Carter's Council of Economic Advisers. Mr. Penner, a resident scholar at the American Enterprise Institute, was a key economic aide to Carter's Council of Economic Advisers. Mr. Penner, a resident scholar at the American Enterprise Institute, was a key economic aide to President Ford.
All three experts have reservations about inflation's future course, centering on the cost to businessmen of producing goods and services -- including wage and benefit hikes still in the 10-to-12 percent range.
Settlements of this magnitude -- typical in recent years -- help to nail the nation's underlying inflation rate to the 10 percent mark.
"The long-term trend of prices," says Gramley, "is a function of long-term costs. And I don't see a breakthrough there yet."
Productivity, or the total of goods and services turned out in an hour of work, rose in the first quarter of 1981, according to the US Labor Department. But unit labor costs -- what employers had to pay in wages, fringe benefits, and social security taxes to achieve these results -- climbed faster.
When this happens, inflation swells. Extra costs, over and above productivity gains, tend to be passed on to consumers in the form of higher prices.
The CPI measures a market basket of goods, from bananas to houses, bought by Americans in a given month. Three major elements, notes Schultze -- energy, the price of homes, and mortgage interest rates -- make up about 25 percent of the consumer price index.
Currently, he says, all three of these items are stable in cost and might even edge down in the months ahead. This gives a rosy tinge to forecasts about CPI performance in 1981.
But the government also uses broader measurements of inflation, including the so- called GNP implicit price deflator. Simply put, this measures the movement of all kinds of prices affecting the economy, not only the cost of consumer goods.
This measurement jumped 10 percent in the first three months of 1981, compared with 10.7 percent in the last quarter of 1980.
This was a slight improvement, but still shows that the underlying rate of inflation in the United States is higher than the narrower consumer price index would indicate.
President Reagan rules out any government intervention in the wage settlement process. This leaves to the marketplace the role of influencing workers and employers at the bargaining table.
High wage settlements reflect not only the desire of workers, union and nonunion alike, to catch up with past inflation, but also a concern that prices will continue to outpace income.
"If we could break inflationary expectations," Penner says, "we could make wage settlements turn around fairly quickly. Whether several months of good CPI will do that, we don't yet know."
"We have to get a breakthrough on long- term costs," Gramley says, "before we get a breakthrough on long-term prices."
A key barometer to watch will be wage settlements still to come, especially in the major bargaining year of 1982.