U.S. productivity declined in the final three months of 2005, the first time that has happened in more than four years. Meanwhile, wage pressures accelerated during the quarter.

Nonfarm business sector productivity dipped at an annual rate of 0.5% in the October-December quarter, while wages rose at a 3.3% pace, the fastest gain in a year, the U.S. Labor Department said today.

Federal Reserve policy makers will watch productivity numbers closely to gauge whether inflationary pressures are emerging in the economy.

Both figures were slightly revised from original estimates a month ago which had productivity falling at a 0.6% rate and wage costs rising at a 3.5% rate in the fourth quarter.

The 0.5% drop in productivity, the amount of output per hour of work, was the first quarterly decline since a 0.6% fall in the first quarter of 2001, when the country slipped into a recession.

Analysts said the latest decline was not as ominous and mainly reflected a temporary slowdown in overall economic growth caused by the hurricanes and surging energy prices.