August 15, 1981

The Government's Producer Price Index for finished goods, a rough measure of the level of inflation consumers will face in the future, edged up by only four-tenths of 1 percent in July, despite a large increase in the price of food, the Labor Department reported today. This was a slightly better outcome than many economists had expected, and appeared to extend the gains that the United States has made against inflation during the last year. In another report, the Federal Reserve Board said that the nation's factories and mines increased their production by threetenths of 1 percent last month. The rise, much of which was attributed to a rebound in coal output after the miners' strike, came despite forecasts that the American economy was entering a recession. (Page 29.)

A Federal administrative law judge recommended today that the air traffic controllers' union be stripped of its right to bargain on behalf of the controllers. He said the union's 12-day-old strike was an ''open and flagrant'' violation of Federal law. John H. Fenton, chief administrative law judge of the Federal Labor Relations Authority, urged the agency, which oversees labormanagement relations in the Federal Government, to revoke the union's ''exclusive recognition status.'' That recommendation, if accepted by the full three-member board, would immediately end the union's right to represent more than 17,000 air traffic controllers in contract negotiations, grievance procedures and various appeals. It would, in short, deprive the union of its reason for being.

The Bolivian Government is apparently suffering a severe shortage of cash, having issued $10 million in checks in the past four weeks that foreign banks have refused to honor, according to private bankers and Government officials. Guido Salinas Vasquez, president of the central bank, said that the checks had bounced because foreign banks, mostly American, had ''suspended advances'' on lines of credit. (Some banks in New York that deal with Bolivia denied this.) And Mr. Salinas expressed the hope in an interview today that the International Monetary Fund would approve a desperately needed standby credit.

Prostitution in New York City has reached beyond such areas as Times Square into residential neighborhoods of working families with children, professional couples and older retired couples. In most areas, law-enforcement officials say, the criminal-justice system has proved virtually helpless to deal with the prostitutes and pimps who, accompanied by bodyguards and lookouts, use whole streets as their places of business. ''It's just out of hand here,'' said Nancy Schuln, president of the Boerum Hill Community Association in Brooklyn. ''You just can't believe it unless you see it. Lookouts roaming around, prostitutes having sex on stoops and in parked cars, women out in the middle of the street in their underwear.''

A patrol boat sold to Iran by France was hijacked off the coast of Spain yesterday as an Iranian crew was sailing it to its new home port. An Iranian monarchist group based here took responsibility. The 150-foot gunboat was one of three cleared for shipment 12 days ago by the French Government after President Francois Mitterrand lifted a two-year embargo that was imposed during the American hostage crisis. The gunboat was commandeered in the Bay of Cadiz, just off the port city of Cadiz. However, details of the incident remained unclear, with the monarchist group asserting that two gunboats had been seized.