Growth in Americans’ productivity slowed in the spring while labour costs edged up, raising concerns about inflationary pressures down the road.

The U.S. Labor Department reports that productivity – the amount of output per hour of work – increased at an annual rate of 1.8% during the April to June quarter, down from a 3.2% increase in the first three months of the year. This is the lowest increase in more than a year.

At the same time, labour costs increased 2.5%, a bit more than the 2.2% seen during the first three months of 2004. Labour costs were nearly double from an initial estimate made a month ago, which said that unit labour costs were rising at a more moderate 1.3% in the April-June quarter. The Federal Reserve is closely watching labour costs for indications that higher wages are causing inflationary pressures to worsen.

The 1.8% increase in productivity represented a downward revision from an initial estimate of 2.2% productivity growth in the second quarter.

The new figures follow last week’s news that the U.S. gross domestic product is growing at an annual rate of 3.3%, down from the expected 3.4%.

Tomorrow, the U.S. Labor Department reports on initial jobless claims for the week ending September 3. Economists expect 315,000 claims, down from 320,000 the previous week.