Saudi Arabia’s construction sector continued to record positive growth rates for the sixth consecutive month during October 2026, driven by a strong recovery in infrastructure projects, despite a slowdown in the overall expansion compared to the previous month, and the emergence of signs of decline for the first time in non-residential building activity since the survey began last January.
A report by Al Rajhi Financial showed that its main index for the Saudi construction sector, seasonally adjusted, fell to 52.3 points in October, compared to 54.4 points in September, recording the slowest growth rate since last May, but it remained above the 50-point level that separates growth from contraction, reflecting the continued expansion of the sector’s activities, albeit at a slower pace.
Infrastructure is driving construction growth
Infrastructure projects accounted for the largest share of activity momentum during October, after this sector recorded a remarkable improvement in business volume, with approximately 40% companies participating in the survey reporting an increase in their activity, compared to only 5% that recorded a decline.
This was reflected in the seasonally adjusted infrastructure activity index, which rose to 64.3 points, compared to 55.8 points in September, achieving the highest level since the survey began in January 2026. Contracting companies attributed this strong performance to the expansion of work related to major engineering projects, primarily land transport and public utilities projects, in addition to the implementation of basic infrastructure works, which continued to provide new job opportunities for companies operating in the sector.
In contrast to the performance of infrastructure, residential construction activity saw a limited increase, with its index recording 50.4 points, reflecting the slowest growth rate since the start of the current expansion wave last May.
In the non-residential building sector, activity declined slightly, with the index falling to 48.8 points, marking its first contraction since data collection began in January. Companies indicated that increased customer caution and project postponements contributed to this decline, amid the impact of regional unrest on business decisions.
New orders growth slows
On the contracting front, Saudi construction companies recorded a new increase in the volume of orders, but at a slower rate compared to previous months, marking the lowest pace of expansion since last May, with infrastructure projects continuing to lead the sectors in terms of the flow of new business.
The companies explained that demand for construction services remained stable during October, benefiting from the continued market need for new projects. However, some clients became more cautious in making their investment decisions, with delays in budget approvals and necessary approvals, especially for commercial and development projects, amid rising cost pressures.
Building material costs are rising sharply.
Regarding operating costs, the survey results revealed continued inflationary pressures on construction companies, with a sharp rise in average input prices during October, although the rate of increase slowed compared to September.
The companies stated that the increase affected a number of basic materials, most notably bitumen, electrical supplies and steel, in addition to an increase in the prices of some imported goods, so that the rate of input cost inflation recorded the second highest level since the survey began.
Despite these pressures, supply chains have maintained a good degree of stability, as the expansion of purchasing materials from local suppliers, along with improved inventory levels at suppliers, has helped to reduce delays in the arrival of materials and equipment, and to keep delivery times without significant extensions.
Optimism about the coming months
Regarding future expectations, Saudi construction companies expressed a positive outlook on the sector's performance over the next three months, with 31% of the companies participating in the survey predicting an increase in activity, compared to 5% who expected a decrease.
Optimistic expectations extended to the three sub-sectors, supported by readiness to launch new projects and continued strong demand for construction work, despite heightened uncertainty regarding the business environment and implementation costs.
Al Rajhi Financial: Infrastructure is the main driver of growth
For his part, Sultan Al-Tuwaim, head of research at Al Rajhi Financial Company, said that the Saudi construction sector index recorded 52.3 points during October, continuing its upward trend for the sixth consecutive month, albeit at a moderate growth rate.
He explained that infrastructure projects were the most prominent driver of the sector’s activity, after its index reached 64.3 points, the highest level since the survey began in January, supported by road and utilities works, while residential constructions maintained their growth, in contrast to a limited decline in non-residential building activities, reflecting the disparity in performance among the sector’s components.
He added that new orders continued to rise, coinciding with the return of employment levels to growth, while the increased reliance on local suppliers contributed to maintaining the stability of supply chains and delivery dates.
Al-Tuwaim pointed out that the costs of production inputs continued to rise, although the pace of their increase slowed compared to September, stressing that future prospects remain positive in various construction activities, as companies await the start of new projects and the continued strength of demand, with 31% of companies expecting activity to grow during the next three months, compared to 5% expecting it to decline.
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