Today's Scoop:

Hey friends, the market is closed on Monday for the holiday weekend. We'll be back with our regular emails on Tuesday. Check out our What's going to happen in 2023 explained if you haven't yet.

Here's what you need to know today...

1. Inflation is still cooling (phew), and overall, things got cheaper last month.

2. Gas, vehicles, and transportation got less expensive.

3. Shelter, food, and services costs are still climbing.

S&P 500: 3,983.171Mo: -1% | 1Yr: -15% | 5Yr: +42%

The market inched higher today after the December Consumer Price Index [🤓] report came in as expected.

Inflation is still cooling off more and more each month. Overall living costs declined slightly last month, driven by lower gas prices, but everything is still 6.5% more expensive than a year ago. 

Gasoline prices, inflated earlier last year by Russia's invasion of Ukraine, fell 9.4% in December. Prices for new and used cars keep falling now that supply chains have cleared up.

Rent and shelter costs are still a considerable force pushing overall inflation higher, but housing price data can take a while to flow into government statistics. In recent months, more real-time data from private companies like Zillow and Realpage have indicated a drop in rent prices. 

Grocery costs are still climbing. Food at home is 12% more expensive than a year ago.

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CPI & Inflation

The Consumer Price Index (CPI) is one of the main ways economists track inflation. Inflation is the rate at which things get more expensive. The CPI looks at a set basket of stuff your average consumer spends money on and tracks how much it costs each month. The rate of change is inflation.

Prices rarely go down. It's normal for things to get more expensive. You'll never be able to buy a Coke for a quarter again, but that's ok. Low inflation (~1-2% per year) is standard. High inflation, like we're seeing now with prices of essential goods going up nearly 5-10% per year, is a problem. It's unmanageable, especially if our incomes aren't rising in tandem.

Policymakers are looking to slow economic activity and cool spending, so prices stop rising so quickly.