RIYADH: Saudi Arabia’s construction index climbed to 56.3 in June, its highest reading on record, as new project starts and stronger demand boosted activity, a new report showed.
Compiled by S&P Global, the alrajhi capital Saudi Construction Index rose from 51.2 in May, marking the strongest growth since the survey began in January and extending expansion for a second consecutive month.
The index, where a reading above 50 signals expanding activity and one below indicates contraction, pointed to the strongest pace of growth since the metric was introduced.
The survey comes as the Kingdom’s construction pipeline remains robust, with the Saudi Contractors Authority reporting 25 project awards worth more than SR29.5 billion ($7.9 billion) in June, the highest monthly total this year.
Although May remained the strongest month by value, June ranked second, underscoring the continued momentum of the Kingdom’s construction sector.
Sultan Al-Towaim, head of research at alrajhi capital, said: “The improvement was broad-based across residential, non-residential and infrastructure activity, supported by a rebound in new orders, the restart of delayed projects, and a more stable operating environment.”
He added: “Residential construction remained the strongest-performing segment, while non-residential and infrastructure activity also returned to healthier growth.”
Saudi Arabia’s construction industry has been underpinned by sustained government spending on housing, infrastructure and tourism developments under Vision 2030.
At the same time, construction firms continue to contend with rising input costs and lingering supply-chain pressures following months of regional geopolitical disruptions.
Ahmad Chreim, economist at MT Trading, told Arab News the latest figures indicate the sector’s expansion is being driven by long-term structural investment rather than a temporary rebound.
“The infrastructure index’s return to growth directly reflects accelerated spending on mega-utilities and transportation projects. Government economic diversification plans are acting as the primary engine for the industry,” he added.
Survey respondents attributed June’s stronger performance to new project launches, improving regional stability and the normalization of business operations. Those factors helped lift activity across all major construction segments.
Residential construction remained the strongest-performing segment, buoyed by stronger investor sentiment and continued government support for housing developments.
Commercial and industrial projects also gathered pace, while infrastructure activity returned to expansion as utilities and transportation projects advanced under Vision 2030 investment spending.
Residential posted the highest activity reading at 58.4, followed by non-residential construction at 55 and infrastructure at 53.6.
The survey also pointed to a strengthening pipeline of future work. New orders increased at the fastest pace since February, reflecting healthier market conditions, easing geopolitical tensions, rapid urbanization and continued infrastructure development across the Kingdom.
Cost pressures, however, remained elevated. Input buying expanded for the first time in four months, while supplier delivery times improved to their best level since February despite shipping routes continuing to be rerouted.
Companies nevertheless reported higher prices for steel, aluminum, cement and electrical equipment, squeezing developers’ margins.
Business confidence also strengthened sharply in June.
Nearly half of surveyed firms, or 49 percent, expect activity to increase over the next 12 months, while only 8 percent anticipate a decline.
“Encouragingly, business expectations improved sharply, with the 12-month outlook reaching its highest level since the start of the survey,” alrajhi capital’s Al-Towaim said, adding: “Cost pressures remain an important area to monitor, particularly with firms reporting higher prices for key materials such as aluminum, steel and electrical equipment.”
Chreim said the latest survey suggests Saudi Arabia’s construction sector is well positioned to maintain its momentum through the remainder of the year.
“The combination of normalized regional business operations and surging private investor confidence positions the sector as a standout performer in the GCC region for the remainder of 2026,” he added.
