Construction index rises for fourth consecutive month in August

Saudi Arabia’s construction sector is growing from a different base than it was a year ago. Residential and infrastructure work is taking the lead, according to the Al Rajhi Capital Saudi Construction Index (pdf), while contractors step back from decade-long giga-project commitments, industry executives told AGBI. The index held near-flat at 55.4 in August from 55.2 in July, maintaining its position above the 50.0 threshold that marks growth. August’s reading was the fourth consecutive month of expansion and its second-highest reading in the eight months since the survey began.

Residential and infrastructure did the work: Residential posted the strongest sub-sector reading at 57.5, the third time in four months it has been the fastest-growing area, on improving market conditions, new project starts, and major urban development schemes. Infrastructure came in at 53.9, its strongest of 2026 so far despite easing from July, supported by regional development, utilities investment and new road and transport projects. Non-residential structures grew at 53.5, with some firms reporting delayed decisions and continued caution among clients.

The near-term pipeline is holding up, even as the long-dated one isn’t. The Kingdom awarded SAR 111 bn in construction contracts between January and July, up almost 60% y-o-y, according to Saudi Contractors Authority data. Contractor appetite for decade-long projects has dropped over the same period as the expected wave of giga-project work failed to materialize, with the Public Investment Fund shifting focus and the private sector taking a larger role, industry executives tell AGBI.

Costs turned back up, and the driver is the route: Input price inflation accelerated in August after a three-month low in July, with firms citing higher transportation and material costs, particularly aluminium, copper, and steel. Locally produced bulk materials have stayed relatively stable, while electrical wire and cable prices are up as much as 22% and 26% y-o-y respectively, Managing Director for the Middle East and Africa at Mace Consult Chris Seymour says. With shipping through the Strait of Hormuz still below pre-war levels, materials that would normally arrive by sea are being routed through Jeddah or Yanbu and trucked to site. The disruption is showing up in freight bills and project planning, rather than in material quality, Seymour says.

That frames the index’s benign supply readings: Supplier delivery times improved for a fourth straight month, and contractors paid for that reliability through the longer land route.

Fixed-price contractors are carrying it: Some are absorbing the additional cost outright, while other clients accepted local material substitutes to avoid delays. Contractors and clients have largely managed delays through earlier planning and by bringing work forward in project schedules. Major projects including Expo 2030 and the 2034 World Cup have enough runway to absorb the disruption without moving delivery dates, according to Seymour.

The mood is still positive, if less so: 42% of survey respondents expect activity to strengthen over the next 12 months against 7% predicting a decline, with confidence strongest in residential and infrastructure on improving sales pipelines and increasing new project starts.