Saudi Arabia's construction sector expanded for a third consecutive month in July, driven by stronger infrastructure and residential activity as new orders rose at the fastest pace in five months, according to  the latest Saudi Construction Index compiled by leading financial services provider Alrajhi Capital.

The Alrajhi Capital Saudi Construction Index is a monthly survey of 200 construction companies designed to measure changes in business activity, new orders, employment, input prices and supplier delivery times across the Saudi construction sector.

The seasonally adjusted headline index eased to 55.2 in July from 56.3 in June but remained well above the 50 level that separates growth from contraction. The July reading was the second-highest since the monthly survey began in January, it stated.

The survey attributed the expansion to a sustained recovery in new orders and the resumption of previously delayed projects across the construction sector.

According to the Index, infrastructure was the strongest-performing segment in July, recording its fastest rate of growth this year as government-backed transport and utilities projects supported activity. 

Residential construction also expanded for a third straight month on the back of demand for urban housing projects, while growth in non-residential construction slowed but remained positive.

New business increased at the fastest pace since February, supported by improved market conditions, stronger investment sentiment and new public infrastructure tenders, the survey said.

Sultan Altowaim, Head of Research at Alrajhi Capital said the Index signaled another strong month for the Saudi construction sector in July, with business activity expanding for a third consecutive month.

"The improvement was supported by stronger new order growth, reflecting continued demand across the sector and the reactivation of previously delayed projects. While input costs continued to rise, cost pressures eased during the month," he stated.

"Infrastructure recorded the strongest growth among the three major construction segments, supported by government-backed transportation and utilities projects, while residential activity continued to benefit from healthy underlying demand. Encouragingly, employment returned to growth as firms responded to stronger pipelines of work," noted Altowaim.

According to the report, rising workloads prompted companies to increase hiring and purchasing activity during the month. Input costs continued to rise in July, although inflation eased from the record high recorded in June as supply conditions improved and supplier delivery times shortened, it added.

On the future outlook, Altowaim said: "Looking ahead, business confidence strengthened to its highest level since the survey began, supported by easing geopolitical tensions, a recovery in new contracts and increasing public-private partnership opportunities. These factors continue to provide a positive backdrop for Saudi Arabia’s construction sector," he added.-TradeArabia News Service