U.S. productivity rose in the third quarter at its fastest pace in four years while labour costs fell.

Today’s report should offer some to U.S. Federal Reserve officials worried about inflation generated by rising energy and commodity prices.

However, the productivity rebound may prove temporary if the economy slows as expected in the fourth quarter and in early 2008.

Nonfarm business productivity swelled at a 4.9% annualized rate between July and September, the U.S. Labor Department said today. That’s more than double the 2.2% rate in the second quarter, which was revised down from a previous estimate of 2.6%. Productivity is defined as output per unit of labour.

The third-quarter productivity gain was well above Wall Street expectations of a 3.4% rise.

Unit labour costs — a key gauge of inflationary pressures — fell 0.2% last quarter, the biggest drop since the second quarter of 2006. Economists had expected a 0.8% rise. Still, labour costs were up 4.3% from a year ago, suggesting some pressures linger.

Meanwhile, U.S. wholesale inventories rose more than expected in September, while demand for goods also remained strong.

Wholesale inventories climbed 0.8% to a seasonally adjusted US$404.55 billion, after rising by an upwardly revised 0.7% during August, the U.S. Commerce Department said today. Originally, inventories in August were reported to have posted a 0.1% increase.

September’s gain in inventories exceeded Wall Street analyst expectations for a 0.3% advance.