U.S. nonfarm productivity rebounded in the second quarter, but a weak underlying trend suggested inflation could pick up more quickly than economists have anticipated.
Productivity increased at a 1.3 percent annual rate in the April-June period, the Labor Department said on Tuesday. But productivity, which measures hourly output per worker, rose only 0.3 percent from a year ago.
In line with annual revisions to gross domestic product published last week, first quarter productivity was revised to show it falling at a 1.1 percent rate instead of the previously reported 3.1 percent pace of decline.
"What it means is that inflation could be more problematic down the road, but we haven't seen it yet. It's something to think about long term," said Gennadiy Goldberg, an economist at TD Securities in New York.
Productivity is one of the metrics the Federal Reserve is watching as it contemplates raising interest rates for the first time in nearly a decade. Economists had forecast productivity rising at a 1.6 percent rate in the second quarter. The economy grew at a 2.3 percent annual pace in the period.
U.S. financial markets were little moved by the data, with investors focused on China's devaluation of its currency. U.S. Treasury prices were trading higher, while U.S. stocks and the dollar fell.