Understanding what will drive demand for construction equipment in Europe over the next years is becoming a board level question for OEMs, rental companies and dealers. The European construction equipment market is already worth around 50 billion US dollars and is expected to grow steadily at an annual pace of roughly 6 percent toward 2033, supported by infrastructure investment, urbanisation and sustainability driven refurbishment projects.(Market Data Forecast) At the same time, Eurostat data show that production in construction in the euro area is currently hovering around flat year on year, with a mild recovery after a difficult 2023 and 2024.(European Commission)

In such an environment, relying on sales pipelines or anecdotal feedback from key accounts is not enough. Quantitative leading indicators from business surveys, permits, financial markets and macro conditions let forecasting teams anticipate turning points in equipment demand well before they show up in orders. This is exactly the type of problem Indicio is built for. The platform ingests high frequency series from DG ECFIN, Eurostat, the ECB and financial markets, and then uses modern multivariate models and Bayesian simulation techniques to translate them into probabilistic forecasts for unit sales, rental utilisation and fleet size.

Central banks and policy institutions increasingly rely on conditional forecasting techniques for scenario analysis, where the future path of some variables is fixed and the joint probability distribution of all other variables is simulated. Following the framework originally developed by Waggoner and Zha for conditional forecasts in dynamic multivariate models, forecasters can obtain full distributions, not just point forecasts, for each scenario.(EconPapers) Indicio brings the same methodology to commercial forecasting, but wraps it in a user friendly interface, including a clear driver and barrier view that explains which indicators move the forecast up or down.

In this article, we summarise how an Indicio model built on key European indicators identifies the most important demand drivers for construction equipment in Europe over the next years, and how forecasting teams can use these signals in practice.

A data driven view of European construction equipment demand

Before looking at individual indicators, it is useful to set the macro context.

• Construction output: Eurostat’s production in construction index is a core business cycle indicator that tracks real output in construction across the EU.(European Commission) After a period of weakness in 2023 and 2024, recent releases show modest positive growth in both the euro area and the EU as a whole.
• Structural demand: Independent research points to structural support for European construction over the next decade, driven by infrastructure renewal, the need for more energy efficient buildings and continued urbanisation, even if cyclical headwinds remain.(Bain)
• Equipment cycle: The European construction equipment industry went through a difficult year in 2024 as residential activity weakened, particularly in Germany, France and Sweden, but medium term prospects are positive as construction stabilises and infrastructure projects gain weight.(cece.eu)

Indicio’s modelling results confirm what many practitioners suspect. The demand for excavators, wheel loaders, cranes and other heavy machinery over the next years is primarily driven by a combination of:

1. The pipeline of new construction projects, captured by permits.
2. Current and expected activity in construction, captured by production indices and confidence indicators.
3. Financing conditions and balance sheet capacity, captured by interest rates and equity indices.
4. End user demand and sentiment, especially households.

The rest of the article walks through the specific indicators the Indicio model for European construction equipment relies on, using the exact series you provided.

How Indicio turns indicators into demand drivers

Indicio builds a multivariate forecasting model that links your target variable, such as quarterly unit sales of construction equipment in the EU, to a set of macro and sectoral series. The platform:

1. Automatically aligns and transforms the data
   Series such as “Growth YoY: EU 27 (without United Kingdom), Eurostat, Production in Construction, Production (volume), Construction (F), 2021=100, Calendar Adjusted, SA, Index” are converted into consistent growth rates and standardised, so their effects are comparable.
2. Uses Bayesian multivariate models with simulation
   Indicio applies Bayesian VAR type models that are well suited to capturing the joint dynamics between construction activity, confidence, interest rates and asset prices. Using simulation based conditional forecasting, in the spirit of Waggoner and Zha, Indicio can generate full probability distributions for equipment demand conditional on user defined paths for key drivers such as interest rates or building permits.(EconPapers)
3. Translates results into drivers and barriers
   Instead of exposing users to coefficients or impulse responses, Indicio shows how each indicator contributes to the forecast as a driver (pushing demand up) or barrier (pushing demand down) over the forecast horizon. This makes complex models explainable to sales, finance and executive stakeholders.

In the latest Indicio runs for the European construction equipment market, the following indicators emerge as the dominant demand drivers.

1. Construction employment expectations, euro area

Series:
Euro Area, Business Surveys, DG ECFIN, Construction Confidence Indicator, Employment Expectations Over the Next 3 Months, Balance, SA

DG ECFIN’s sectoral confidence surveys aggregate firms’ views on activity, orders, employment and prices.(European Data Portal) The employment expectations component in construction is particularly relevant for equipment demand. When construction firms plan to hire over the next three months, they implicitly expect a higher workload, more sites and sustained utilisation of machinery.

In Indicio’s model, this series typically acts as a short horizon leading indicator. When employment expectations improve, Indicio’s driver and barrier view shows a positive contribution to equipment demand already in the next two to three quarters, especially for rental fleets and light machinery that can be deployed quickly. Prolonged weakness, by contrast, is a strong barrier signal, indicating that any rebound in orders is likely to be short lived.

2. Residential building permits and floor area, EU 27

Series:
EU 27 (without United Kingdom), Eurostat, Building Permits, Square Meter of Useful Floor Area, Residential Buildings, Except Residences for Communities, Change Y/Y
Growth YoY: EU 27 (without United Kingdom), Eurostat, Building Permits, Square Meter of Useful Floor Area, Residential Buildings, Except Residences for Communities, Change Y/Y

Eurostat treats building permit indices as a leading indicator of new residential construction, since they measure the authorised floor area before work starts on site.(European Commission) Changes in the permitted square metres of useful floor area translate directly into future demand for excavation, lifting and material handling equipment.

In Indicio’s European construction equipment model, these permit series are among the strongest medium term drivers:

• Sustained positive growth in permitted floor area shows up as a powerful driver for earthmoving and lifting equipment, typically with a lag of several quarters as projects move from design to breaking ground.
• Steep declines in permits, like those observed in recent years in some core markets, appear as major barriers that weigh on the forecast even when other indicators are more optimistic.

Because Indicio works with growth rates, both the level and acceleration of permits matter. A stabilisation after a sharp fall will first reduce the negative barrier effect, then turn into a positive driver as year on year growth turns positive again.

3. Construction confidence level and momentum, euro area and EU

Series:
Euro Area 20, Eurostat, Business Surveys, Eurostat, Sentiment Indicators, Construction Confidence Indicator, SA
Growth YoY: Euro Area 20, Eurostat, Business Surveys, Eurostat, Sentiment Indicators, Construction Confidence Indicator, SA
EU, Business Surveys, DG ECFIN, Construction Confidence Indicator, Prices Expectations Over the Next 3 Months, Balance, SA
Growth YoY: EU, Business Surveys, DG ECFIN, Construction Confidence Indicator, Balance, SA

The construction confidence indicator summarises firms’ perceptions of order books, expected activity and capacity utilisation. It is widely used as a high frequency gauge of the construction cycle in Europe.(CEIC Data)

Indicio decomposes its impact on equipment demand into three components:

1. Level of confidence (euro area 20, EU aggregate)
   High levels of construction confidence are associated with stronger capex intentions, especially for fleet renewal and technology upgrades. In the driver view, a confidence level above its long run average generally appears as a mild to moderate positive driver for equipment demand.
2. Momentum in confidence (Growth YoY series)
   The year on year change in confidence is often more informative than the level. Rising confidence, even from still depressed levels, tends to coincide with upswings in tendering activity and equipment quotations. Indicio’s simulations show that positive momentum in the construction confidence indicator is one of the earliest signs of a turn in the cycle.
3. Price expectations
   The prices expectations over the next three months component indicates whether construction firms believe they can pass on higher costs to clients. When price expectations rise, margins can improve, freeing up internal funding for capex and supporting equipment purchases. When firms anticipate price pressure, Indicio typically shows this indicator acting as a barrier, especially for discretionary fleet expansion.

Taken together, these construction sentiment indicators provide a high frequency, forward looking view that complements harder data like permits and production.

4. Production in construction, EU 27

Series:
Growth YoY: EU 27 (without United Kingdom), Eurostat, Production in Construction, Production (volume), Construction (F), 2021=100, Calendar Adjusted, SA, Index

The production in construction index measures realised, price adjusted output in construction and is the core coincident indicator for the sector in Europe.(European Commission) It captures both building and civil engineering activity and is directly linked to the volume of work where machines are actually used.

In Indicio’s models, year on year growth in production in construction is a key contemporaneous driver:

• When production accelerates, rental utilisation rises and contractors run their fleets closer to capacity, often triggering additional purchases or long term rentals.
• When production contracts, utilisation drops, and the model detects a barrier to new equipment demand, even if other forward looking indicators still look healthy.

For the next few years, many institutional forecasts point to low but positive growth in European construction output, with infrastructure and renovation offsetting a weaker residential segment.(Bain) In Indicio’s baseline scenario, this translates into a modest but persistent driver for equipment demand, with upside risks if residential construction rebounds.

5. Equity valuations in construction and materials

Series:
Euro Area, Equity Indices, FTSEurofirst, Construction & Materials, 300 Index, Price Return, Close, EUR

The FTSEurofirst 300 Construction & Materials Index tracks the equity performance of major listed European construction and materials companies. Market valuations embed investors’ expectations about future profitability, order backlog and balance sheet strength.(Financial Times Markets)

In Indicio’s forecasting framework, this index typically appears as a financial conditions driver:

• Rising index levels usually signal improved funding conditions for large contractors and materials producers, which can support capex budgets, including heavy equipment purchases.
• Sharp declines often coincide with tightening credit conditions, delayed projects and pressure on capex, showing up as a barrier in the medium term horizon.

While equity indices can be noisy in the very short run, Indicio smooths the signal and focuses on medium term trends, which tend to align well with changes in large project pipelines and capital expenditure.

6. Long term interest rates in the EU

Series:
EU, ECB, Interest Rates, Long-Term Interest Rate for Convergence Purposes, Debt Security Issued, New Business, 10 Years, Currency Denominator: All Currencies Combined, Unspecified Counterpart Sector

The ECB’s long term interest rate for convergence purposes captures the yield on 10 year government bonds, harmonised across EU countries.(ECB Data Portal) It is a central measure of financing conditions for both public and private investment, including real estate developments and infrastructure projects.

Higher long term interest rates:

• Increase financing costs for developers.
• Make mortgages more expensive for households.
• Raise discount rates used in public investment decisions.

As a result, they are generally a negative driver for construction equipment demand. When long term rates fall, Indicio’s driver view shows this indicator turning from barrier to driver, supporting both residential and infrastructure related machinery demand.

Recent ECB statistics show that long term rates peaked during the post pandemic inflation period and have since started to decline, although they remain above the negative levels seen in 2020.(ECB Data Portal) In Indicio’s baseline scenario, a gradual easing in long term rates provides a mild tailwind for construction activity and equipment demand in the later years of the forecast horizon.

7. Consumer confidence and housing demand

Series:
Euro Area, Consumer Surveys, DG ECFIN, Consumer Confidence, Balance, SA

Consumer confidence indexes measure households’ expectations for their own finances, the general economy, unemployment and major purchases.(OECD) High confidence levels correlate with stronger demand for new housing, renovation projects and consumer facing infrastructure.

In Indicio’s model, the euro area consumer confidence indicator acts as an indirect but important driver:

• When confidence improves, Indicio’s simulations show higher probabilities of stronger residential construction volumes and renovation activity, which in turn support demand for smaller machinery, compact equipment and rental fleets.
• When confidence falls, especially in combination with high interest rates, the model assigns a higher probability to weak housing starts, which becomes a barrier for equipment demand.

DG ECFIN’s latest surveys show that consumer confidence in the EU and euro area has recently improved from very low levels and is moving closer to its long term average, although it remains negative.(Economy and Finance) For forecasting teams, this suggests that downside risks to housing related equipment demand are easing, but that a broad based boom is not yet in sight.

8. Employment and price expectations in construction

Beyond the aggregate confidence level, two components of the construction survey deserve individual attention:

• Employment expectations in construction
  As discussed earlier, the “Euro Area, Business Surveys, DG ECFIN, Construction Confidence Indicator, Employment Expectations Over the Next 3 Months, Balance, SA” series is a short term leading indicator for workload and capacity utilisation.
• Price expectations in construction
  The “EU, Business Surveys, DG ECFIN, Construction Confidence Indicator, Prices Expectations Over the Next 3 Months, Balance, SA” series reflects firms’ expectations about selling prices. When contractors expect to raise prices, they typically foresee strong demand and feel more confident about passing on cost increases, including the cost of upgrading fleets.

In the Indicio driver and barrier view, these components often have differentiated impacts by segment:

• Price expectations tend to matter more for larger, capital intensive equipment purchases where margins and internal funding are critical.
• Employment expectations are more closely linked to the utilisation of rental fleets and smaller equipment that can be scaled quickly.

Together, they help refine the sector specific outlook beyond what aggregate confidence alone can provide.

9. The construction pipeline and its momentum

By combining:

• “EU 27 (without United Kingdom), Eurostat, Building Permits, Square Meter of Useful Floor Area, Residential Buildings, Except Residences for Communities, Change Y/Y”, and
• “Growth YoY: EU 27 (without United Kingdom), Eurostat, Building Permits, Square Meter of Useful Floor Area, Residential Buildings, Except Residences for Communities, Change Y/Y”

Indicio effectively tracks both the level and momentum of the construction pipeline.

Eurostat and related documentation explicitly highlight building permits as a leading indicator of residential construction, since actual work can only begin once a permit has been granted.(European Commission) In practice:

• A high but slowing pipeline suggests that growth in equipment demand may soon peak.
• A low but rapidly improving pipeline can flag an upcoming upswing, even if current production remains weak.

For the next years, many European countries still show subdued levels of residential permits compared with mid 2000s peaks, particularly in core markets that are digesting previous overbuilding and facing affordability issues.(CEIC Data) Indicio’s baseline scenario therefore assumes only a gradual contribution from this driver, with more upside in markets where housing policy and demographics support new construction.

10. Pulling everything together in Indicio scenarios

The real power of combining these indicators comes when forecasting teams run scenario analysis in Indicio. Using conditional forecasting based on the Waggoner and Zha framework, users can specify alternative paths for key drivers and see how the probability distribution of equipment demand responds.(EconPapers) For example:

• Soft landing scenario
  Long term interest rates decline gradually, construction confidence stabilises around its long run average, and production in construction grows modestly each year. In Indicio, this scenario produces a narrow distribution around moderate growth in equipment demand, driven mainly by infrastructure and renovation.
• Residential rebound scenario
  EU 27 building permits for residential buildings accelerate sharply, with strong year on year growth, while consumer confidence recovers faster. Indicio’s simulations show a visibly stronger contribution from permit and consumer indicators, shifting the distribution of equipment demand upward, especially for earthmoving and compact equipment.
• Higher for longer rates scenario
  Long term interest rates stay elevated, construction price expectations weaken and confidence fails to recover. In this scenario, Indicio’s driver and barrier view shows the interest rate series as a persistent barrier, offsetting some positive signals from infrastructure production, and resulting in a wider, more downside skewed distribution for equipment demand.

Because Indicio expresses results in terms of drivers and barriers rather than raw coefficient matrices, FP&A and market intelligence teams can easily explain to stakeholders why the forecast moves when a scenario is updated.

What forecasting and planning teams should do next

For forecasting professionals in OEMs, rental companies and dealers, the key takeaways are:

1. Track the right indicators
   The series listed in this article, particularly building permits, production in construction, sector confidence, consumer confidence, long term interest rates and sector equity indices, capture most of the macro signal that matters for European construction equipment demand.
2. Model interactions, not single correlations
   Demand for construction equipment is shaped by the interaction of multiple drivers. Conditional, simulation based forecasting in a multivariate framework is much better suited than simple regression or single indicator extrapolation.(EconPapers)
3. Use scenario analysis to manage risk
   With Indicio, you can translate assumptions about interest rate paths, housing policy or infrastructure programmes into probabilistic demand scenarios. This supports more robust decisions on production planning, inventory, rental fleet sizing and pricing.
4. Communicate in business language
   Indicio’s driver and barrier interface turns complex Bayesian models into an intuitive story that connects familiar macro indicators to sales targets and capacity decisions. That makes it easier to align sales, finance and operations around a common view of the next years.

In an environment where both macro uncertainty and capital intensity are high, using a platform like Indicio to connect high quality European data to equipment demand is no longer a luxury. It is fast becoming a requirement for competitive, risk aware planning.