Jarmo T. Kotilaine, chief economist at the National Commercial Bank, said the commodity price environment is tight in many cases but the rate of price increases tends to be slowing down.
“With seasonal factors waning, the near term outlook is one of relative stability of inflation, barring exogenous shocks,” Kotilaine added.
Government data also showed that monthly price growth slowed to 0.5 percent despite rising housing costs and the impact of increased government spending.
The new figures came as the Riyadh-based Jadwa Investment said the food price inflation fell to its lowest level since January 2010 in October.
This was the result of the rapid drop in global food price inflation, according to the UN Food and Agriculture Organization, year-on-year global food price inflation dropped to 6 percent in October from 33 percent July.
With food accounting for the largest proportion of the cost of living index (26 percent), this slowdown was sufficient to lower headline inflation even though inflation in most other areas rose.
Commenting on inflation figures, Kotilaine added: “In general, the latest reading reflects both the persistence of inflationary pressures as well on the more positive side, the fact that inflation now appears relatively range-bound. Although structural pressures will take a long time to clear in areas such as housing, the uncertain international environment should reduce the probability of significant additional pressures.”
According to Reuters, inflation in Saudi Arabia had hovered below 5 percent for most of 2011 before reaching an eight-month high of 5.3 percent in September, when prices jumped 0.9 percent on a month-on-month basis.
This trend reflects the growing internal demand of consumers which is creating internal inflationary pressures, Salahuldean Khashoggi, a financial analyst, said in his remarks on the latest data.
He added: Although price growth is showing a tendency to slow down - only 0.5 percent in October - another noticeable trend change is surprising price increases in groups that have been still for a long time. Usually, inflation and price growth have been driven by the "rent, renovation, fuel, and water" CPI segments in addition to the "food and beverages" segment.”
In November, he said the greatest price increase was in the sub-segment "other personal items". In October, all segments' prices increased or maintained their previous levels. The surprise increases came in the "education and entertainment" segment, where it has increased by 3.5 percent, and "home furnishing" which increased by 1.5 percent.
The Jadwa report pointed out that inflation for “other goods and services” reached a three-year high owing mainly to jewelry prices, which were 31 percent higher than in October 2010. Jewelry prices are driven by the price of gold. Rental inflation continued to rise and at 8 percent was the highest since March.
Bonuses for government workers and pay rises appear to have pushed up demand for property at a time when new supply continues remains modest, the report said.
Inflation for education and entertainment hit its highest level since at least 2003. This was due to higher school fees. Fees for the new school year are always incorporated in the October data. Similarly, annual adjustments (for the cost of domestic staff) caused the jump in inflation for home furniture, the report added.
However, Khan H. Zahid, vice president and chief economist at Riyad Capital, said: “Month-to-month changes in inflation, especially at this time of the year, are due to seasonal factors, and need to be interpreted with caution. The small drop in October to 5.2 percent may simply be the post-Ramadan effect of prices slowing down.”
Zahid added: “We were, in fact, predicting inflation to fall to 5.1 percent in October. We know that inflation increased in September to 5.3 percent from 4.8 percent in August, mainly due to Ramadan and Eid Al-Fitr, when there is a seasonal increase in demand for food, clothing, etc.”
Given that, Zahid said: “We just celebrated Eid Al-Adha, we expect to see inflation increase in November. However, we believe that the Haj seasonal increase this year will not be large, mainly because of the global downtrend in inflation and a greater vigilance on the part of domestic authorities since Ramadan on price increases. Our forecast for November is 5.2 percent.”
The economist added: “We expect inflation to be tame at 5 percent. It is notable that we have recently revised our yearly forecast down from 5.2 percent to 5 percent due to the recent trends. For 2012, we have also revised our forecast down from 5 percent to 4.7 percent.”
Zahid said: “I should also point out that we often tend to forget that, as long as inflation is positive, consumers are always paying more, not less. Thus, inflation makes all past price increases permanent. The only way consumers can get any relief from past price increases is if inflation were to be negative, and we seldom see that in today’s world.”
Rising housing costs, a large injection of government spending and volatile exchange rates with some large trading partners have caused prices to edge up in Saudi Arabia this year, but inflation is expected to slowly decline toward the end of 2011 and into 2012.
Saudi Arabian Monetary Agency Gov. Muhammad Al-Jasser said in October he was not concerned about the Kingdom’s inflation level, which he expected to ease during the fourth quarter. 
“Inflation levels are not worrying,” he said.
“I expect it to continue to decline,” Reuters quoted Al-Jasser as saying.