The latest index from «Al Rajhi Capital» for the Saudi construction sector, in collaboration with S&P Global, that the sector maintained its expansionary trajectory through July 2026, despite the seasonally adjusted index falling to 55.2 points, compared to 56.3 points in June—a decrease of 1.1 points, or 2%, on a month-over-month basis.
Despite this decline, the index remained above the 50-point level that separates growth from contraction, allowing the sector to continue expanding for the third consecutive month, while the July reading reflected continued strength in activity, marking the second-highest reading for the index since the survey began last January.
The Al Rajhi Capital Index for the Saudi construction sector is based on a monthly survey of 200 construction companies selected to ensure they represent the actual structure of the sector; the July release marks the third edition of the index.
New Orders Drive Sector Recovery
The decline in the overall index in July was not a reflection of a broad slowdown in activity construction companies, as the survey results revealed the largest increase in total new business in five months, driven by accelerating demand in key construction sectors.
This coincided with the continued recovery in new orders and the resumption of a number of postponed projects, while residential construction firms in particular saw a strong improvement in new business volume, recording the largest increase since January.
Participating companies attributed this improvement to better market conditions and the continued recovery of investor confidence, along with new opportunities for bids related to public infrastructure projects.
Index Performance Since the Start of 2026
The Saudi Construction Sector index this year at 54.7 points in January 2026, before rising slightly to 54.9 points in February, an increase of 0.2 points, or 0.4%, on a month-over-month basis. However, the index entered a period of decline in March and April, falling to 50.8 points in March—a drop of 4.1 points, or 7.5%, compared to February— and then continued to fall in April to 48.5 points, a further decline of 2.3 points or 4.5%.
The sector returned to growth territory in May, when the index rose to 51.2 points, an increase of 2.7 points, or 5.6%, on a monthly basis, before making an even bigger jump in June to 56.3 points, marking a monthly increase of 5.1 points or 10%.
In July, the index fell to 55.2 points, a decline of 1.1 points or 2%, but remained at a level reflecting continued expansion in the sector’s activity.
Infrastructure Leads Construction Growth
The three main construction sectors recorded an increase in activity during July, but the infrastructure sector led the growth rates, with its activity index reaching 56.9 points—the strongest reading the sector has recorded since the survey began in January. Feedback from participating construction companies indicates that government-backed projects formed a strong foundation for continued growth in infrastructure work during July, particularly projects related to transportation and utilities.
This reflects the continued strength of activity in this sector, which recorded the highest reading among the three construction categories during the month.
Housing Continues to Grow for the Third Month
Residential construction, for its part, also posted a strong performance in July, with the activity index reaching 56.0 points, marking the sector’s third consecutive month of growth. Construction companies pointed to strong demand for urban housing projects, coupled with a general improvement in market conditions, which supported the continued expansion of residential activity during the month. As a result, residential construction ranked second in terms of growth strength among the three sectors, trailing infrastructure by a narrow margin.
Relative Slowdown in Nonresidential Construction
In contrast, the nonresidential construction sector lost some of its momentum in July, though activity remained in growth territory, registering 53.4 points.
Although the pace of expansion slowed compared to the other sectors, the July reading marked the second-fastest pace of growth for non-residential construction since February, indicating that activity continued to improve despite losing some momentum during the month.
The sector-by-sector readings show that the infrastructure index stood at 56.9 points, compared to 56.0 points for residential construction and 53.4 points for nonresidential construction in July 2026.
Business Optimism Reaches Highest Level
In parallel with the continued growth in activity, construction companies" optimism regarding the sector’s future has risen, with 48% of participating companies expecting business activity to increase over the next 12 months.
In contrast, only 4% of companies expected activity to decline during the same period, bringing optimism levels to their highest since the survey began in January.
This positive outlook is based on a range of factors identified by the companies, including the easing of geopolitical tensions, a rebound in new contracts, and expanding opportunities linked to the Kingdom’s Vision 2030 initiatives. Companies also cited the expansion of public-private partnerships as one of the factors supporting growth expectations for the coming period.
The Sector Is Set for Continued Expansion Despite a Decline in the Index
The July reading indicates that the decline in the monthly index has not altered the overall picture of activity in the Saudi construction sector, which remained above the growth threshold for the third consecutive month, supported by an increase in new business, the resumption of postponed projects, and strong infrastructure activity.
At the same time, sector-specific data reveal variations in growth strength, with infrastructure and residential construction leading the way, while non-residential construction maintained its growth despite losing some momentum.
