JEDDAH, Saudi Arabia, (Reuters) – Saudi Arabia’s central bank expects inflationary pressures in the biggest Arab economy to continue decreasing in the fourth quarter of this year, it said in a report on Monday.

Spending usually increases during the annual Haj pilgrimage season, which ended last week, as nearly 3 million pilgrims flock to Mecca and Medina. But Saudi Arabia’s annual inflation rate has been slowing gradually since peaking at 5.4 percent in February and March.

“The available data indicates…the expectation of a continuing slowdown in inflation levels during the fourth quarter of 2012,” the report said.

Annual inflation for September slowed to 3.6 percent from 3.8 percent in August.

“Local prices for products and services have witnessed a large decline in growth rates for the third quarter. There was also a decline in inflation in the renovation, rents, fuel and water category, and the transport and communications category, which is expected to continue through the fourth quarter of 2012,” the report said.

Last year, the government promised to build half a million new homes to ease a housing shortage which has been responsible for pushing up costs in that sector.