Inflation Watch

The first full week of the Administration's temporary price freeze brought an atmosphere of urgency to the assault on inflation. In a sudden show of toughness, the Cost of Living Council ordered three companies--Peavey (farm supplies), Stokely-Van Camp (processed food) and International Utilities (gas and electricity)--to roll back prices raised in violation of regulations during Phase II. The council plans soon to order additional rollbacks of price increases posted during this year's first quarter in at least seven industries.

Other reports last week:

PRICES: The Consumer Price Index for May rose at a sharp 7.2% annual rate, equaling April's increase. Inflation is "much too high and subsiding too slowly," conceded Herbert Stein, chairman of the President's Council of Economic Advisers. Gloomily, the Agriculture Department predicted that food prices for the year will jump by an oppressive 12%.

LABOR: Reasonable settlements by major unions like the rubber and electrical workers have lately helped keep inflation from climbing even higher. Now the Teamsters are reported ready to settle this week for annual wage and benefit increases averaging about 7% over each of the next three years. However, the freeze on company prices could complicate final negotiations. A warm relationship has grown between Teamster Boss Frank Fitzsimmons and President Nixon, and there had been some fear among truck owners that the union would flaunt its clout in the White House to push for a much higher settlement.

STOCK MARKET: In an effort to prod reluctant investors, the Government relaxed its guidelines to allow companies to increase their dividends. The move makes much more attractive the stocks of auto, oil and other companies bulging with profits and in a good position to boost payments.

THE DOLLAR: Foreign moneymen remained skeptical that Nixon's latest economic initiatives will be enough to revive the ailing dollar soon. As a result, the international exchange rate of the greenback continued to drift lower against most currencies, falling to 2.54 in German marks and 4.22 in French francs.

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