Measurement Problems of Inflation Disaggregation

Why do the three quarterly GNP inflation measures differ so much when they are constructed from the same underlying price data? Algebraically and in tables using data of the second quarter of 1984, it is shown that these differences occur because of quarterly shifts in the composition of the nation's product. Disaggregation of the inflation contributions of the GNP components also makes it clear why, for quarterly analyses, the GNP chain price index is superior to both the implicit GNP deflator and the fixed-weight GNP price index. In particular, the implicit GNP deflator can give severely distorted inflation signals.