How a 10.3% rise in the cost of imported goods caused a 1.3% drop in US inflation...or, lets just make it up as we go skipping merrily along...

http://www.atimes.com/atimes/Global_Economy/IK09Dj02.html

...snip...'"Inflation was low because oil prices surged," which he says can be explained by noting that "In GDP math, sometimes one plus one equals zero."

...snip...'At first, I thought that he was insulting me by expecting me to believe such stupidity - that price inflation would fall because oil went up in price, but he holds up the actual news article from MarketWatch.com, which confirms that "As odd as it sounds, the government reported that inflation was at a four-decade low in the third quarter, primarily because import oil prices rose so much."

'but that it is all so easily explainable by Shelley Smith, who's in charge of figuring the price index for the government's Bureau of Economic Analysis, who said sometimes the mechanical formula produces some "quirky, nonintuititive relationships".

"Most of the time," it is explained, "the government's formula doesn't produce any weird numbers, because the mathematical quirks all cancel each other out. But in the just concluded third quarter, it did produce quirky numbers that don't accurately reflect reality, even though they are correct from an accounting point of view."

And from that "accounting point of view", the way it works is that prices of imported goods rose at a 10.3% annual pace in the quarter, but that import prices are subtracted from GDP, and thus somehow subtracted 1.3 percentage points from inflation, even though the prices of imports went up!'...snip...