Thursday was a huge day.

Investors were looking for the most anticipated piece of data from the US Bureau of Labor Statistics — Consumer Price Index (CPI).

(Also known as: “The number that will tell you when things will be good again.”)

Analysts use CPI as the primary inflation gauge. It shows changes in the price of goods and services in the past month compared to a month and a year ago.

CPI is also an indicator of the economy’s health. It will be one of the most important things discussed at the next Fed meeting. It will take place at the end of January when the Fed decides on further changes in the interest rates.

The December CPI data came positive, with a 0.1% decline over November.

What a long-anticipated decline it was.

Most of the decline was due to lower energy costs. They dropped 4.5% month-on-month, driven mainly by lower fuel prices. Gas got cheaper. Another notable drop—used cars. 2.5% lower than in November.

The decline in these two groups was expected as these were fueling inflation in the last two years. They ran too hot for too long.

It all started when COVID-19 lockdowns destroyed supply chains for carmakers, leading to a massive spike in used car prices.

Then a major energy crisis from the pandemic and the ongoing war in Ukraine hit the global economies. Energy commodities of all kinds skyrocketed.

Luckily, today, gasoline prices are back to their historical averages and used car prices keep declining.

The year-over-year CPI reading, however, was +6.5%. In other words, in general, prices for goods and services in the US gained 6.5% in December 2022 over the year prior.

The rate of inflation is going down. It’s the sixth consecutive drop in inflation and the lowest year-over-year change since October 2021.

That’s a positive trend that gives markets confidence about the overall economic health and a possible slowdown in Fed interest rate hikes. Which, in turn, can lead to faster economic recovery.

Things could be good again soon.

Supercomputers in Search of New Graphite

No matter how this year’s economy plays out (recession, no recession), investors still have high hopes for the energy sector.

The world’s shift toward carbon-free power continues. It’s an unstoppable trend with massive government and private sector support.

Billions of dollars go into EV and battery production, updated power grids, and related infrastructure.

The biggest challenge is to keep costs under control. Massive demand for critical metals like lithium, nickel, manganese, and non-metal materials like graphite sends prices of these so high they are out of reach for most battery makers. And now scientists all over the world are looking for cheaper solutions. 

Revolutionary technologies and substitutes for rare-earth metals will drive the green transition. And investors better keep an eye on these.

In early January, Ohio University unveiled its latest research that can help fuse fossil fuels and our carbon-free energy future. The university’s team modeled a way to turn coal into graphite for future use in batteries of all scales.

The research team simulated the process at Pittsburgh Supercomputing Center. The idea is to remove all the impurities from dirty coal and turn it into battery-grade graphite. The simulation was successful, yet it required placing coal under high pressure and a temperature of 5,000 Fahrenheit.

Not an easy task, and very energy intensive. It’s hard because researchers aim to reach a specific chemical structure of six carbon rings. Only this structure can form distinct layers and be used in EVs’ li-ion batteries.

If the team can reproduce the process commercially, it can turn abundant coal resources into a high-tech graphite material. This will be a game-changer for the graphite sector.

For now, it’s a theory proven in controlled conditions. Until researchers prove their concept is economically feasible, graphite mining will be the only way to power EVs on the roads.

High-quality graphite is rare, and only a few mines worldwide can supply the clean energy sector with the stuff it needs.

Watch the graphite sector closely.

Thank you for your loyal readership,

The Financial Star team