Saudi Construction Sector Extends Growth for Fifth Month Despite Rising Costs

Saudi Arabia’s construction sector continued to expand for a fifth consecutive month in September, supported by resilient demand and ongoing development projects, although growth slowed from the previous month, according to a survey compiled by S&P Global for Al Rajhi Capital.

The seasonally adjusted Saudi Construction Index fell to 54.4 in September from 55.4 in August, marking its weakest reading in four months. However, the index remained above the 50-point threshold that separates expansion from contraction, indicating continued growth across the sector.

Activity increased across residential, non-residential and infrastructure construction, with residential and infrastructure projects recording the strongest performances, according to responses from around 200 construction companies.

Sultan Al-Towaim, head of research at Al Rajhi Capital, said ongoing projects and resilient demand supported growth across all three segments.

The latest figures come as Saudi Arabia continues to advance major housing, transport, infrastructure and industrial developments under its economic diversification strategy.

Business confidence also remained positive in September. Data from the General Authority for Statistics showed that its Business Confidence Index stood at 56.6. Construction recorded the highest reading among the three main sectors at 57.1, compared with 56.3 for industry and 55.4 for services.

Infrastructure and housing lead growth

Infrastructure activity strengthened to 55.8 in September from 53.9 in August, marking its second-highest reading since the survey began in January.

Residential construction recorded an index reading of 56.6, while non-residential activity, covering offices, commercial buildings, institutional facilities and industrial projects, rose only marginally to 50.9.

Survey respondents attributed the expansion to favourable market conditions and demand generated by large-scale development programmes. However, some companies reported that slower client decision-making had affected sales, while others faced increasing operating costs.

New orders continue to increase

New orders rose for a fifth consecutive month in September, although growth was slower than in the previous four months. Infrastructure recorded the strongest increase in orders, while non-residential construction saw the weakest performance.

Companies reported healthy sales pipelines linked to major housing, transport and industrial developments. Some respondents said regional instability had prompted clients to delay approvals for new commercial projects.

Cost pressures also intensified during the month. Around 45% of surveyed companies reported higher input costs, while fewer than 1% recorded a decline. Input price inflation reached its highest level since January, and delivery times lengthened slightly.

“Cost pressures increased, with input price inflation reaching its highest level since January, alongside a slight lengthening of delivery times,” Al-Towaim said.

He added that subcontractor availability continued to improve and companies remained positive about their project pipelines.

Companies remain optimistic

Despite rising costs and slower growth, construction firms maintained a positive outlook for the coming months.

Around 34% of respondents expected activity to increase over the next three months, while only 8% anticipated a decline.

Confidence was strongest in residential construction, where optimism reached its second-highest level since January. The figures suggest that continued investment in housing and infrastructure projects is supporting the sector, even as businesses contend with cost pressures and delays in some commercial developments.