US GDP Contracts by most since 1982

The greenback edged up higher against the majors amid heightened risk aversion, pushing the euro beneath the 1.28-level. Data from the US pointed toward further deterioration in fundamentals, suggesting the recession continues to worsen.

US economic reports released earlier revealed a sharp contraction in GDP growth, down by an annualized 3.8% in Q4 versus a 0.5% decline previously. Although the drop in GDP was less than the anticipated drop of 5.4%, it was still the steepest contraction in the US economy since 1982. The Q4 sales component of GDP declined by 5.1% versus a 1.3% decline previously, while PCE price index posted a 5.5% drop versus a 5% decline. The Q4 employment costs eased to 0.5% from 0.7%. The January Chicago PMI declined to 33.3 from 35.1 in December, while the University of Michigan consumer sentiment survey improved to 61.2 in January, up from 60.1.