Middle East Business

Saudi construction activity rises for a fourth month as the August index reaches 55.4 and residential work leads

By Staff Writer  |  8 September 2026

The monthly survey of about 200 Saudi construction companies put residential activity at 57.5, infrastructure at 53.9 and non-residential at 53.5, with infrastructure new orders growing at their fastest since February, purchasing at a survey record and input costs rising again after July's three-month low.

Construction activity in Saudi Arabia expanded for a fourth consecutive month in August, according to the alrajhi capital Saudi Construction Index published on 7 September 2026. The seasonally adjusted headline index rose to 55.4 from 55.2 in July, comfortably above the 50 point threshold that separates expansion from contraction and the second-highest reading since the survey began in January.

The index is compiled from questionnaires sent to a panel of around 200 construction companies, stratified by activity and workforce size, and tracks the change in total construction activity against the previous month. It is a weighted average of three sub-sectors: residential, non-residential structures and infrastructure. Survey data were first collected in January 2026 and the series was launched publicly in June.

All three segments grew in August. Residential activity was the fastest-growing area for the third time in four months, with its index at 57.5. Infrastructure stood at 53.9, a slower rate than July but stronger than any reading in the first half of the year. Non-residential work posted 53.5.

Orders, staffing and purchasing

Firms attributed the residential momentum to improving market conditions, new project starts and work on major urban development schemes. Infrastructure growth was supported by regional development, utilities investment, new roads and transport connectivity projects. Non-residential activity rose on improving economic conditions and the restarting of projects, although some companies reported that clients were slower to decide and more cautious.

Total new business received by the panel increased sharply again in August. Infrastructure was the best-performing category for new work, recording its fastest expansion since February, and residential new orders improved to the greatest extent since the survey began. Stronger demand produced a rise in employment, and purchasing activity increased at its fastest pace in the survey's history.

Activity increased across all three major segments, while new orders remained strong.

Sultan Altowaim, Head of Research at alrajhi capital

Supply conditions improved for a fourth consecutive month even as demand for construction inputs grew, though some firms continued to report international shipping delays. Input price inflation picked up in August after slowing to a three-month low in July, driven by higher transport costs and raw material prices, particularly for aluminium, copper and steel.

Outlook

Companies remained upbeat about the year ahead, with 42 per cent expecting an upturn in overall activity and 7 per cent predicting a decline, although the level of optimism was lower than in July. Confidence on a three-month horizon was strongest in the residential and infrastructure segments, supported by reports of improving sales pipelines and new project starts.

Although input cost inflation accelerated during August, firms remained optimistic about the outlook, supported by healthy project pipelines and expectations of continued activity growth.

Sultan Altowaim, Head of Research at alrajhi capital

What the reading does and does not say

A diffusion index of this kind records the direction of change reported by the panel, not the value of work done. A reading of 55.4 means that, weighted across the three sub-sectors, materially more firms reported higher activity than lower activity compared with July. For practitioners, the useful signals are the ones that bear on contract risk: input costs rising again after a single month of relief, shipping delays still reported by some respondents, and client decisions slowing in the non-residential segment even as orders for infrastructure and housing accelerate. The release does not break the figures down by region or by project size.