July 16, 2004 -- The prices paid to producers for finished goods fell 0.3 percent in June, the Department of Labor said in a report on Thursday.

The decline came as a surprise after prices had increased 0.8 percent in May and 0.7 percent in April. Economists surveyed by Barron's had forecast a 0.2 percent rise.

Investors hoped that the decline would cool the inflation fears of the Federal Reserve, which recently increased interest rates for the first time in four years.

Falling gasoline prices were the primary reason for June's dip, falling 5.2 percent during the month.

Excluding the volatile food and energy categories, prices increased a modest 0.2 percent, following a similar 0.3 percent rise in May.

While the reading shows a decline in prices, many small businesses are starting to feel more pressure to raise their prices, particularly manufacturers facing rising raw material costs.

Nearly 58 percent of the 259 manufacturers surveyed by TEC International, an executive roundtable group of mostly small and mid-size companies, said they have raised their prices or anticipate doing so in the next twelve months. Comparatively, 54 percent of all members surveyed have raised or will raise prices.

The Small Business Optimism Index reported by the National Federation of Independent Business reported similar findings, with 35 percent of those surveyed reporting higher average selling prices in June. The number of owners reporting higher prices has jumped 31 percent since January.