The question the August construction survey left open has been answered, in both directions. Al Rajhi Capital’s Saudi Construction Index, compiled by S&P Global from a monthly survey of about 200 contractors, read 54.4 in September, down from 55.4 in August: a fifth consecutive month of expansion, at the slowest pace in four. The sector is still growing. What changed is who is pulling it.
Infrastructure activity registered 55.8, up from 53.9 in August and its second-highest reading since the survey began in January. Residential work, the category that led the index through the summer, eased to 56.6 from 57.5 and kept the top spot by a narrowing margin. Non-residential building, the offices, commercial and institutional work that rounds out the survey, slipped to 50.9, barely above the line that separates growth from contraction. August’s open question was whether infrastructure would re-accelerate as awards resumed after the summer lull. It has, almost exactly as the order books suggested it would.
New orders tell the same story with a harder edge. Total new business rose for a fifth consecutive month but at the slowest rate since the rebound began in May, with infrastructure the strongest category and non-residential the weakest. Surveyed firms pointed to slower client decision-making on commercial projects. A reading of 50.9 is not a downturn, but it is a sector waiting for clients to sign, and the gap between public-works momentum and private commercial caution is now the widest the young survey has recorded.
The second answer August asked for is less comfortable. Input price inflation reached its highest level since the survey began in January, with about 45 percent of firms reporting higher costs and fewer than one percent reporting declines. Suppliers’ delivery times, which had improved for four consecutive months through August, lengthened slightly in September. One month does not make a squeeze, but the direction flipped on both lines at once, and cost pressure arriving just as infrastructure work accelerates is the combination that tests fixed-price contracts signed earlier in the year. Subcontractor availability kept improving, which suggests the constraint is in materials and logistics rather than labor.
Sultan Al-Towaim, Al Rajhi Capital’s head of research, said activity remained “supported by ongoing projects and resilient demand.” The firms broadly agree with him about the direction: 34 percent expect activity to rise over the coming three months against 8 percent expecting decline, with optimism concentrated where the work now is, in residential and infrastructure.
The rotation matters beyond the survey because of what each category prices. Housing activity reads on the mortgage channel and the land-fee reforms pushing plots toward builders. Infrastructure reads on the state: water transmission, transport and utilities awards that move with the budget cycle, two months before a 2027 budget plans SR1.392 trillion in spending. Commercial building reads on private tenants, and at 50.9 it says they are the most hesitant party on the Saudi building site. The autumn’s test is now a single line: whether the cost curve flattens before the infrastructure pipeline, the one doing the pulling, has to reprice around it.