Al Rajhi Capital: Saudi Construction Sector Grows for Sixth Straight Month
Al Rajhi Capital reported that Saudi construction activity grew for a sixth consecutive month in October, though at the slowest pace since May. The seasonally adjusted headline Al Rajhi Capital Saudi Construction Index fell to 52.3 from 54.4 in September. It stayed clearly above the 50.0 mark that separates growth from contraction.
Infrastructure drove the growth, with activity rising sharply and at a faster pace in October. Residential construction also rose. Non-residential building activity fell for the first time since the survey began in January.
The report found infrastructure was by far the best-performing segment in October. About 40% of surveyed companies reported more infrastructure activity, and only 5% reported less. The seasonally adjusted Infrastructure Activity Index rose to 64.3 from 55.8 in September, its highest reading since the survey began in early 2026.
Many respondents pointed to heavy workloads on major civil engineering projects, especially road transport, utilities and other critical infrastructure.
Residential construction activity also rose, with its index at 50.4. That was the slowest growth since the current expansion began in May. Non-residential building activity dipped slightly, with its index at 48.8. Companies put this down to more cautious clients and some project delays, partly because of regional turmoil.
October data showed another moderate rise in total new orders for Saudi construction firms, though growth was the slowest since May. Infrastructure led in new business.
Construction firms mostly cited stronger client demand and resilient market conditions in October. Some reported that budget approvals were taking longer, especially for commercial development projects. This was partly due to rising cost pressures.
Average input costs rose sharply in October. Firms often cited higher prices for bitumen, electrical supplies and steel. The overall rate of cost inflation slowed from September but was the second-highest since the survey began.
Some respondents reported upward price pressure on imported goods. Supply chains held up well, though, according to the latest data. Construction firms said greater use of local materials and better supplier stocks helped keep delivery times from getting longer.
About 31% of surveyed companies expect construction activity to rise over the next three months, and only 5% expect a decline. The outlook was positive in all three sub-sectors. Firms linked their optimism to planned project starts and continued strong demand, even though business uncertainty has increased.
Sultan Al-Tuwaim, Head of Research at Al Rajhi Capital, said: “The Al Rajhi Capital Saudi Construction Index registered 52.3 in October, extending growth for a sixth consecutive month, albeit at a moderate pace. Infrastructure was the main growth driver. Its activity index reached 64.3, the highest reading since the survey began in January, supported by roads and utilities projects. Residential construction activity also continued to grow, while non-residential building activity edged down slightly, reflecting divergent performance across sub-sectors.
“New orders continued to rise and employment returned to growth, while greater reliance on local suppliers helped keep delivery times broadly stable. Input cost inflation eased from September but remained elevated. Looking ahead, business expectations stayed positive across all three sub-sectors. Around 31% of firms expect activity to increase over the next three months, compared with only 5% anticipating a decline. Planned project starts and resilient demand continue to support the sector’s growth outlook.”
