Inflation in the Kingdom has been floating below 5 percent for most of 2011. It stood at 4.9 percent on an annual basis and 1.2 percent month-on-month in July.
“The overall headline number is not as high as we expected it to be because of Ramadan,” said Khan Zahid, chief economist at Riyad Capital.
“A number of factors may explain this. Slowing global inflation, fall in oil prices which leads to a drop in transport prices and voluntary restraint by retailers and wholesalers on food prices,” he said.
Food costs, which account for a quarter of Saudi consumer expenses, soared 1.5 percent on a monthly basis in August, keeping their growth pace from the previous month, the data from the Central Department of Statistics showed.
Housing price growth slowed to 0.7 percent month-on-month from 1.6 percent in July, while transport costs were flat in August after a 0.7 percent increase in the previous month, the data showed.
The Saudi central bank expects inflationary pressures in the Kingdom to continue at a moderate pace in the third-quarter of this year, it said last month.
The International Monetary Fund said in August that the Kingdom, which pegs its riyal currency to the US dollar, has to keep a close eye on inflationary pressures following a planned increase in social spending.
With political upheaval sweeping the region, Saudi Arabia announced plans to spend an estimated $130 billion — nearly 30 percent of its annual economic output — on projects including the building of new homes and hospitals.
“We expect the next four months to see a further rise in prices as the Eid Al-Adha holiday approaches,” said Abdulhamid Al-Amri, a member of the Saudi Economic Association think tank.
Analyst polled by Reuters in June expected an average inflation of 5.6 percent in 2011, slightly below last year’s 5.3 percent.
